Stock Market Measures STOXX 600 Record Longest Winspan in Nearly 4 Years; Concentration Tends Toward Central Bank Policies and Tariff Developments
European Shares Soaring on Trade War Developments and Fed Meeting Anticipation
European equities continued their winning streak on Monday, with traders keeping a close eye on trade war progress and the upcoming U.S. Federal Reserve policy meeting later this week.
The pan-European STOXX 600 index added 0.2% for its 10th consecutive session of gains, marking its longest winning streak since August 2021. Notable performances include Germany's main stock index surging 1.3%, nearing an all-time high, and the Dutch-listed shares of Shell decreasing 1.9%, as rumors swirled about a potential acquisition of rival BP.
Fragmented sectors saw mixed results, with insurers leading the pack, up 1.1%, and real estate adding 0.8%. However, energy shares were a drag on the overall gains, falling 0.6% due to weaker oil prices.
Trade tensions seem to be easing between the U.S. and China, providing investor optimism in recent weeks. Regarding this shift, Ipek Ozkardeskaya, senior market analyst at Swissquote Bank, stated, "The markets are brushing off the stress of trade tensions and are gearing up for a landmark trade deal in the coming days."
However, President Trump's announcement of a 100% tariff on movies produced outside the U.S. has added an element of uncertainty. Central banks' decisions, particularly the Fed's, will also be crucial this week, as it is expected to leave rates steady on Wednesday. Similarly, the Bank of England's rate decision is due this week as well.
A survey showed euro zone investor morale rebounded more robustly than expected in May after taking a big hit last month due to U.S. tariffs, although it remains at a subdued level. Erste Group soared 6.7% after acquiring 49% of Polish-based Santander Bank Polska and 50% of Santander TFI, following an agreement with Spanish bank Banco Santander SA.
As the U.S.-China trade saga unfolds, European stocks could feel the ripple effects. According to enrichment data, prolonged tensions may lead to market volatility, particularly affecting cyclical sectors like autos and tech, as well as luxury goods manufacturers. However, there are opportunities for European companies in trade diversion and the clean energy sector, especially in the context of China's renewable energy push.
Key risks moving forward include the potential for renewed tariffs or sanctions, a slowdown in China's economy, and increased geopolitical pressure on Europe to align with either the U.S. or China. Sector-specific stocks to watch include BMW, Volkswagen, and Renault in the automotive sector, as well as Kering, Hermès, and luxury goods stocks reliant on Chinese consumer spending. Keeping a close eye on developments in U.S. export controls, Chinese stimulus measures, and EU trade policy responses can offer valuable insights for investors.
- The STOXX 600 index's 10th consecutive session of gains, lasting since August 2021, is a result of European equities soaring on trade war developments and Fed meeting anticipation.
- In the pan-European index, notable positions include Germany's main stock index surging 1.3%, nearing an all-time high, and the Dutch-listed shares of Shell decreasing 1.9%, due to rumors about a potential acquisition of rival BP.
- Fragmented sectors saw mixed results, with insurers leading the pack, up 1.1%, and real estate adding 0.8%, while energy shares were a drag, falling 0.6% due to weaker oil prices.
- Ipek Ozkardeskaya, senior market analyst at Swissquote Bank, stated that the markets are brushing off the stress of trade tensions and gearing up for a potential landmark trade deal in the coming days.
- The Federal Reserve's decision about interest rates, expected this week, will be crucial, alongside the Bank of England's rate decision and the impact of the U.S.'s announced 100% tariff on movies produced outside the U.S.
- With the U.S.-China trade saga unfolding, European shares could feel the ripple effects, particularly affecting sectors like autos, tech, and luxury goods manufacturers. However, opportunities for European companies in trade diversion and the clean energy sector may arise, especially considering China's renewable energy push.
