European markets upward trend continues, Stoxx 600 up 1%; Direct Line down 13%

European markets upward trend continues, Stoxx 600 up 1%; Direct Line down 13%.

The pan-European Stoxx 600 index gained 1.2% in early deals, with oil and gas stocks climbing 2.9% to lead gains as all sectors and major bourses entered positive territory.

Swedish cloud computing firm Sinch was the biggest climber in early trade, adding more than 9%.

At the bottom of the European blue chip index, Direct Line shares plunged more than 13% after the British insurer rescinded a £50 million ($59.6 million) share buyback and cut its profit guidance.

The broadly positive start in Europe comes amid more buoyant global sentiment.

In Asia-Pacific on Monday, Hong Kong’s Hang Seng jumped more than 2%, while U.S. stock index futures were modestly higher early on Monday morning after a positive end to last week.

Friday’s relief rally came as traders bet that the Federal Reserve will be less aggressive at its upcoming meeting. (European markets upward trend continues)

The Wall Street Journal reported Sunday that the central bank is on track to lift interest rates by 75 basis points at its meeting later this month, rather than a larger, full-percentage-point increase that some analysts had forecast.

Recession fears have dominated trading sentiment in recent weeks as market participants worry that aggressive action from the Fed — in an effort to tame decades-high inflation — will ultimately tip the economy into a recession.

Last week, fresh inflation data showed consumer prices jumped 9.1% in June, a hotter-than-expected reading and the largest increase since 1981.

That, in turn, led traders to bet that the Fed could raise rates by a full percentage point at its meeting at the end of July.

Haleon shares commenced trading on the London Stock Exchange’s Main Market on Monday as an independent, listed company, after GSK shareholders approved the demerger of its consumer health-care business.

European shares hit three-week highs on Monday, tracking gains in global equities, even as investors are seen staying cautious ahead of a European Central Bank policy meeting and a scheduled resumption of Russian gas flows via the Nord Stream 1 pipeline.

The pan-European STOXX 600 index (.STOXX) rose 1.4% in broad-based buying, led by miners (.SXPP), energy stocks (.SXEP) and banks (.SX7P).

Investor sentiment globally was lifted by easing fears about a 100-basis-point interest rate hike by the U.S. Federal Reserve this month, and hopes of fresh China stimulus amid COVID-19 flare-ups.

European markets upward trend continues

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European markets upward trend continues

“It seems as though recession worries eased off a bit and you’ve seen this particularly in the oil industry where supply concerns are rising compared to demand concerns,” said Susannah Streeter, a senior market analyst at Hargreaves Lansdown.

The STOXX 600 has slipped about 15% from an all-time high hit in January, as worries about slowing growth in China, the world’s second-largest economy, aggressive central bank policy tightening globally and the fallout of the Russia-Ukraine war dented risk appetite.

In earnings-driven moves on Monday, Finland’s Nordea (NDAFI.HE) jumped 3.7% as a rise in earned loan interests boosted second-quarter operating earnings.

Limiting the STOXX 600’s advance, British insurers fell after Direct Line (DLGD.L) slipped 13.5% on a profit warning. Peers Admiral (ADML.L) and Sabre Insurance Group (SBRE.L) lost 6.8% and 4.3%, respectively.

In the biggest listing in Europe for more than a decade, GSK’s (GSK.L) spun-off consumer health business Haleon (HLN.L) started trading at 330 pence, before slipping to 328.10.

Meanwhile, maintenance on the Nord Stream 1 pipeline, which brings Russian gas to Germany, is scheduled to end on July 21.

Investors are waiting to see if Russia stalls the resumption of gas supply amid its war with Ukraine.

This could result in a gas supply crunch in Europe and keep prices elevated for longer.

“If there’s any hint that there could be a delay in reopening, that’s going to cause fresh jitters about the prospects for euro zone given the gas guzzling nature of countries like Germany,” Streeter said.

The ECB on Thursday is set to increase its key interest rate by 25 basis points amid record-high inflation, and investors will look for clues on the pace and magnitude of future hikes as the central bank lags most of its major peers in raising rates.

The bank’s tool to cap a widening gap between core and peripheral bonds will also be watched.

Italian bond spreads widened on Monday as investors awaited Prime Minister Mario Draghi’s parliament address on Wednesday amid a leadership crisis.

End European markets upward trend continues

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European markets upward trend continues

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