European shares rise on China reopening, rate hike optimism

By Bansari Mayur Kamdar

(Reuters) -European shares rose on Monday, extending the year’s upbeat start to a second week, as China reopened its borders overnight and U.S. and European data soothed nerves about aggressive tightening by major global central banks.

The pan-European STOXX 600 gained 0.5% by 0923 GMT.

The index clocked its best weekly performance in over nine months on Friday after a clutch of positive data – including strong euro zone factory activity and a drop in the region’s headline inflation – indicated a milder-than-expected recession and easing price pressures.

That, along with data showing a tight U.S. labour market, calmed fears that the U.S. Federal Reserve and the European Central Bank would continue with their aggressive monetary policy tightening.

Rate-sensitive tech stocks rose 1.1%.

Industrial production in Europe’s largest economy, Germany, rose slightly more than expected in November, adding to the optimism and lifting Germany’s DAX 0.3% higher.

It plays into the rhetoric that’s been going on over the past week, which seems to suggest that maybe the recession in Europe is not going to be as deep and long-lasting as might have initially been thought, said Danni Hewson, financial analyst at AJ Bell.

“At a time when everyone has been really focused on the cost-of-living crisis, the engine underneath all of that noise seems to have actually been picking up quite nicely in a way that a lot of people feared it wouldn’t.”

Industrials rose 0.7%, boosting the regional STOXX 600 index.

Investors now await the euro zone’s unemployment data for November at 1000 GMT for further cues on the strength of the labour market.

Travellers streamed into China by air, land and sea on Sunday, as Beijing opened borders that have been all but shut since the start of the COVID-19 pandemic.

Miners added 1.8% as base metal prices advanced on hopes of demand recovery from top consumer China, while oil stocks gained 1.0% on firm crude prices.

China-exposed financials, such as insurer Prudential rose 2.0%.

UK’s commodity-heavy FTSE 100 added 0.2% to hit its highest level since 2019. [.L]

Investors were nervous following a media report that the British government plans to scale back energy subsidies for businesses, said Hewson.

Among individual movers, AstraZeneca slipped 0.9% as it struck a deal to buy U.S.-based biopharmaceutical firm CinCor Pharma Inc for up to $1.8 billion to strengthen its pipeline of heart and kidney drugs and grow beyond its mainstay cancer business.

London-listed video game companies Devolver Digital and Frontier Developments dropped 9.4% and 40.1%, respectively, after disappointing trading updates.

(Reporting by Bansari Mayur Kamdar in Bengaluru; Editing by Savio D’Souza)