Banks, commodity stocks lift European shares as markets await ECB meet

By Susan Mathew

(Reuters) – European shares rose strongly on Monday, helped by banks and commodity-linked stocks, while investors kept an eye out for U.S. inflation data and details from a European Central Bank meeting later this week.

The pan-European STOXX 600 index rose 0.8% after ending 0.9% lower last week on concerns about economic growth, amid rising prices and bets of monetary policy tightening by major central banks.

Banks, which typically appreciate in a high interest rate environment, rose 1.4% on Monday.

Miners climbed 2.0%, while luxury stocks also rallied. Both sectors derive significant demand from China, and rose after authorities eased more curbs in Beijing and Shanghai. [.SS] [MET/L]

Buying this morning is being spurred by easing COVID-19 curbs in China, and strong U.S. jobs data last week assuaging some worries that the U.S. Federal Reserve’s aggressive tightening will tip the U.S. economy into recession, said Stuart Cole, head macro strategist at Equiti Capital.

London’s commodities heavy FTSE 100 jumped 1.2% after an extended weekend.

British Prime Minister Boris Johnson will face a confidence vote later on Monday, the chairman of the 1922 Committee Graham Brady has told lawmakers, after a report documented alcohol-fuelled parties when Britain was under strict COVID lockdowns.

“The market will see Johnson losing as… allowing the government, under a new leader, to finally focus on the wider issues of the day, such as the cost of living crisis,” Cole said.

On Thursday, the European Central Bank is expected to confirm an end to bond buying this month and investors will look for more clues on the pace and magnitude of hikes.

Investors ramped up bets on ECB interest rate rises this year after data last week showed euro zone inflation at a record high. A bigger, 50 basis-point hike at one of the bank’s policy meetings by October is being priced in.

Meanwhile, U.S. inflation data due on Friday is seen showing a rise month-on-month. The Fed has signalled rate hikes this month and the next before pausing to asses economic data. But May inflation numbers could see money market speculate about an extended rate hike cycle.

Among other stocks, auto parts supplier Melrose Industries Plc rose 4.0% after it agreed to sell its Ergotron unit for $650 million.

Clontarf Energy Plc tumbled 69.3% after Western Gas said its Sasanof-1 exploration well off Western Australia found no hydrocarbons. Clontraf is one among Western Gas’s partners in the Sasanof-1 well.

(Reporting by Susan Mathew in Bengaluru; Editing by Shounak Dasgupta and Shailesh Kuber)