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FX.co ★ European stocks start week with big gains

European stocks start week with big gains

On Monday's trading, major European stock indices are rising after last week's significant decline by more than 4% amid investors' concerns about the recession in the global economy.

At the time of writing the article, the STOXX Europe 600 index of Europe's leading companies rose by 0.36% to 404.70 points.

At the same time, the shares of cruise line operator Carnival PLC soared by 7.8% and topped the list of major gainers among the STOXX Europe 600 components.

The British FTSE 100 increased by 0.42% to 7046.8 points, the French CAC 40 went up 0.21% to 5895.93 points and the German DAX jumped by 0.43% to 13180.43 points.

European stocks start week with big gains

Meanwhile, at the beginning of the trading session the French CAC 40 was steadily falling after the elections were held in the country. Consequently, France's President Emmanuel Macron lost his absolute majority in the National Assembly.

Top gainers and losers

On Monday, a significant upward factor for Europe's stock market was a sharp increase in shares of the energy sector amid traders' expectations of further supply disruptions. Thus, stocks of Eni, TotalEnergies, Shell and BP added 1.42%, 0.65%, 1.28%, and 1.28% respectively since the start of the trading session.

Meanwhile, shares of Swiss low-cost airline EasyJet plummeted considerably amid its statement that it would cut some flights in June-August due to staff shortages and restrictions on flights at Gatwick and Amsterdam.

The market capitalization of British online food delivery company Deliveroo PLC plunged by 4.2% after its management announced the appointment of a new chief financial officer.

French carmaker Renault S.A. stock dropped by 6.4% after the news came that analysts at independent US investment firm Jefferies improved its stock forecast.

Current market situation

On the first day of the week, investors continue to analyze a number of the world central banks' major statements on raising interest rates amid permanently soaring inflation. Investors are seriously concerned about the prospects of the economic recession. Therefore, on Monday European market's participants focused on the data on further steps of Fed's monetary policy tightening.

Notably, at the end of the two-day meeting on June 14 and 15 the US Federal Reserve raised its key rate immediately by 75 basis points to 1,50-1,75%. The regulator has not increased the indicator dramatically since 1994.

During the press conference based on the results of the US Federal Reserve's meeting its Chairman Jerome Powell also stated that the prime rate level might be raised by another 50-75 basis points the following month.

Powell is likely to make a hawkish statement to the US House of Representatives later this week.

On Monday night, investors will focus on ECB President Christine Lagarde and ECB chief economist Philip Lane's speeches.

Experts believe the regulator's representatives may demand to raise benchmark interest rates by 50 basis points during several meetings. Moreover, the European Central Bank plans to accelerate creation of a new instrument to limit fragmentation in the euro area that will help the regulator to achieve a decrease in the divergence in borrowing costs for different countries.

Traders are also awaiting the data on the UK inflation which is scheduled on Wednesday. According to analysts' preliminary forecasts, this indicator soared to 9.1% from 9% in April year-on-year.

As for domestic statistics for the euro area, the final data of the EU Statistical Office show that the consumer price index rose by 8.1% year-on-year in May against 7.4% in April. The figure was the highest since the beginning of data calculation.

Previous trading results

On Friday, European stock indices showed a diverse trading amid the data on the record inflation in the euro area. At the same time, last week was the worst since March 2022. European stock exchanges collapsed by 4-5% during the previous five trading days.

On Friday, the STOXX Europe 600 index of Europe's leading companies rose by 0.09% to 403.25 points.

Shares of German food delivery service Delivery Hero and Finnish tire manufacturer Nokian were major gainers among the components of STOXX Europe 600. They added 12% and 10.3% respectively.

Stocks of key energy companies hurt due to the collapse of the global oil prices topped the list of losers. Consequently, shares of British BP Plc dropped by 6.2%, while French TotalEnergies went down 5.1%.

The British FTSE 100 sank by 0.41% to 7016.25 points, the French CAC 40 lost 0.06% to 5882.65 points, and the German DAX gained 0.67% to 13126.26 points.

Last week, the FTSE 100 index crashed by 4.1%, the CAC 40 index fell by 4.92% and the DAX index dropped by 4.62%.

The shares of UK's largest grocery chain Tesco Plc increased by 0.8% on Friday despite the fact that the company's sales in March-April 2022 declined dramatically. Besides, Tesco management noted the "incredibly challenging" market environment amid customers' fight with accelerating inflation.

Spain's largest financial and credit group Banco Santander stock soared by 2.3%. The day before, Bloomberg reported that Banco Santander would plan to appoint insider Hector Grisi as its next CEO replacing current CEO Jose Antonio Alvarez who would resign on January 1, 2023.

Last week, global central banks' permanent monetary policy tightening became a significant downward factor for the European stock market.

According to the outcome of Thursday's meeting, the Bank of England raised the base rate by 0.25% for the fifth time in a row since December 2021. The current rate of 1.25% year-on-year was the highest in the last 13 years. Moreover, the British central bank issued a forecast of accelerating annual inflation in the UK above 11% by October 2022.

On the same day, the Swiss National Bank unexpectedly raised its benchmark rate by 50 basis points to minus 0.25% per year for the first time since 2007. Besides, the regulator said it might raise rates again to curb inflation in the near future.

However, the Bank of Japan did not accept hawkish decisions taken by the world's regulators. At a monetary policy meeting on Friday morning, the central bank decided to follow its strategy of keeping the yield on 10-year bonds at zero.

*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade
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