European shares closed higher on Monday as a soft business activity reading strengthened the case for more monetary policy easing by the European Central Bank this year, with rate-sensitive sectors such as real estate and utilities rising.
The pan-European Stoxx 600 index closed 0.4 per cent higher, recouping some losses following its biggest one-day drop since August in the last session. Autos led gains among major Stoxx sectors with a 1.9 per cent advance while retail also gained 1.2 per cent. A survey showed euro zone business activity contracted sharply and unexpectedly this month, as the bloc’s dominant services industry flatlined while a downturn in manufacturing accelerated.
“A payback from the Paris Olympics was largely expected. But today’s release was much worse than many had anticipated, suggesting a rather gloomy underlying growth picture for the euro zone,” said Fabio Balboni, senior economist, euro zone at HSBC.
DUBLIN
Ryanair traded flat on the day despite announcing that it had arranged to fly the Leinster Rugby team to its European fixtures this season from Belfast instead of Dublin Airport amid an ongoing farrago over the annual passenger cap at the aviation hub. As expectations of further monetary easing by the European Central Bank increased both AIB and Bank of Ireland lost ground, declining 3.86 per cent and 1.53 per cent respectively. Food giant Kerry traded up 1.85 per cent €90.60 on the back positive sentiment for the sector. Other movers included home builder Cairn, which fell 1 per cent to €1.89.
EUROPE
Germany’s DAX closed 0.7 per cent up while France’s benchmark ended near flat, bogged down by falling bank stocks.
French banks including Credit Agricole, SocGen and BNP Paribas were among top declines on the Stoxx index with the euro zone banks index sliding 1.8 per cent.
The euro slipped against the dollar while the yield on the German two-year bond, which reflects near-term rate expectations, slipped to 2.149 per cent.
Rate-sensitive real estate rose 1.3 per cent while utilities, often traded as a bond proxy, gained 1.1 per cent.
The ECB cut interest rates in June and also earlier this month.
Among individual stock moves, Germany’s Commerzbank slid 5.7 per cent after Berlin said it does not support a takeover by Italy’s UniCredit. UniCredit shares closed 3.3 per cent lower.
Aurubis dropped 10.1 per cent after Europe’s largest copper producer guided for lower earnings next financial year as it expects metal prices to fall, and after hurdles with a production ramp-up hit its fourth-quarter earnings.
LONDON
UK shares ended higher on Monday after logging their worst day since August in the previous session, boosted by rising commodity-linked shares, while drugmaker AstraZeneca fell following a disappointing experimental precision drug trial.
The blue-chip FTSE 100 closed 0.4 per cent higher, while the more domestically-focused FTSE 250 midcap index added 0.1 per cent.
Precious metal miners led gains among the major FTSE 350 indexes with a more than 2 per cent rise as gold prices scaled record highs, driven by Fed rate cuts and demand for the safe-haven asset on geopolitical risks in the Middle East.
Heavyweight energy shares added 0.6 per cent, tracking elevated crude oil prices.
Both indexes had notched up their worst day in nearly seven weeks on Friday, after the Bank of England held interest rates steady on Thursday, even as the Federal Reserve cut benchmark rates by an outsized 50 basis points.
Last week, Britain’s consumer price inflation data – which is closely watched by the BoE for its monetary policy – pointed to persistent price pressures in the services sector.
AstraZeneca slipped 1.7 per cent after the drugmaker said its experimental precision drug did not significantly improve overall survival for patients with a type of breast cancer in a late-stage trial.
NEW YORK
Wall Street’s main indexes trended higher in choppy trading on Monday as investors focused on comments from Federal Reserve policymakers and steady factory activity data, following the central bank’s decision to commence monetary policy easing.
The Fed’s pivotal move on monetary policy in the previous week propped up the main indexes for monthly gains, bucking a historical trend where September has been a weak month for equities on average.
Comments from a number of policymakers were the main focus on the day as investors scoured for clues on why the central bank kicked off its easing cycle with an outsized 50 basis points cut.
Fed presidents such as Raphael Bostic, Neel Kashkari and Austan Goolsbee supported the central bank’s last rate cut and voiced support for more cuts in the rest of the year.
Ten out of the 11 S&P 500 sectors were higher. Real estate stocks lead gains with a 0.9 per cent rise, while healthcare stocks declined 0.1 per cent.
Having rallied for much of the year, the S&P 500 is a whisker away from an all-time high and the blue-chip Dow hit another intraday record high.
Among rate-sensitive growth stocks, Tesla jumped 4.8 per cent, while Meta rose 1 per cent after Citigroup lifted its price target on the stock. – Additional reporting by Reuters
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