European Shares Rally as Wall Street Strength Boosts Investor Confidence
European shares climbed on Monday, following a robust rally on Wall Street, as investors eagerly awaited a key U.S. inflation reading and a wave of economic data from the euro zone this week. The pan-European index ended the day with a gain of 0.5%, moving closer to the two-year highs it reached earlier in the month. Meanwhile, the euro zone blue-chip STOXX50E index rose to levels not seen since 2001. Real estate shares led the way, with a 1.6% increase in value, closely followed by retailers who enjoyed a 1.4% advance.
Investors across the Atlantic will be closely watching the release of the U.S. January consumer price index (CPI) reading on Tuesday, seeking indications about the potential timing of a rate cut by the Federal Reserve. It is expected that headline consumer inflation will slow on a monthly and yearly basis, further confirming the belief that inflationary pressures are on the decline. Stuart Cole, Chief Macro Economist at Equiti Capital, explained that the recent rally on Wall Street is also providing a boost to European stocks. The Nasdaq Composite closed above 5,000 for the first time on Friday due to increased betting on the potential for artificial intelligence.
This week is packed with domestic economic data for Europe, including fourth-quarter euro zone GDP growth, consumer price inflation figures from Spain and other regions, as well as ZEW economic sentiment surveys. Italian stocks outperformed their regional peers with an impressive rise of 1.0%, reaching their highest level since June 2008. On the other hand, the UK market ended the day flat. The fall in European bond yields, following dovish remarks from European Central Bank (ECB) Governing Council member Fabio Panetta on Saturday, also boosted equities. ECB board member Piero Cipollone confirmed on Monday that the central bank does not need to further dampen the euro zone economy to control inflation.
Among individual companies, luxury shoemaker Tod’s experienced a surge of 18.4% in its shares after private equity firm L Catterton offered to buy 36% of the company and take it private. Meanwhile, oil refiner Saras saw its shares drop by 3.7% as global commodity trader Vitol finalized a deal to acquire 35% of the company from Italy’s Moratti family at a price of 1.75 euros per share, valuing the entire group at 1.7 billion euros.
Leading the gainers on the STOXX 600 was Just Eat Takeaway, which saw its shares rise by 8.8%, followed by Delivery Hero with a 4.5% increase after Deutsche Bank raised its target price for the two stocks. Siemens Energy also performed well, advancing by more than 5.7% after receiving an upgrade from BofA Global Research. Overall, the European stock market is benefiting from improving investor sentiment and positive global market trends.
Analyst comment
Positive news: European shares rally as Wall Street strength boosts investor confidence. The market is expected to continue to rise as investors gain confidence from the strong performance of Wall Street and positive global market trends.
