Comment: European markets on the rise

 European markets have been having a good week – by Sharon Bentley-Hamlyn, Investment Manager of the Aubrey European Conviction Strategy.

On Monday, Europe’s Stoxx 600 rose 0.5 per cent, while Germany’s Dax added 0.4 per cent, and London’s FTSE 100 gained 0.2 per cent. The indices have risen 5.9 per cent, 7.2 per cent and 3.1 per cent, respectively, so far this year, helped by cooler energy prices and the receding risk of a recession across the eurozone in 2023.

Fast forward to today, The pan-European Stoxx 600 was up 0.4% by late morning, with retail stocks adding 1.5% to lead gains as most sectors and major bourses traded in positive territory. Markets have been buoyed by data this week showing improved business sentiment in Germany and an uptick in eurozone services and manufacturing activity, prompting optimism that a recession in the eurozone might be avoided.

Sources:

1.       Stocks make gains as investors bet on smaller Fed rate rise | Financial Times (ft.com)

2.       European markets open to close: stocks, data, earnings and news (cnbc.com)

Sharon Bentley-Hamlyn, Investment Manager at Aubrey Capital Management, commented,

“Markets are understandably focussed on the direction of interest rates and a potential Fed pivot later in the year.  Although it is possible, I would not personally bet the ranch on a very near-term reduction to 25 basis point rises, or indeed outright reductions, as, having been wrong footed in their view inflation would be “transitory”, central banks will want to see a very clear downward trend and not be caught out again, so they may leave rates higher for longer.

European markets have made a good start to the year, but it will be their earnings performance that determines share price performance as the year progresses.  A downward move in interest rates will just be icing on the cake”.