European stocks rise on anticipations of ECB rate cuts
(MENAFN) European Stocks extended their gains for the third consecutive session on Monday, buoyed by growing investor optimism regarding an anticipated interest rate cut by the European Central bank (ECB) later in the week. The STOXX 600 index closed 0.3 percent higher, with notable increases seen in Spanish and Italian stocks, which rose by 0.7 percent and 0.5 percent, respectively.
All eyes are now focused on the ECB's upcoming interest rate decision, scheduled for Thursday, amid widespread anticipation that the bank will opt for a 25 basis point reduction in borrowing costs, as indicated by a poll. The prevailing sentiment among investors is driven by concerns over persistently low inflation and subdued economic activity over the past 18 months, prompting expectations for proactive measures from the central bank.
Commenting on the potential rate cut, the BlackRock Investment Institute noted that while the economic conditions warrant a reduction in interest rates, it anticipates a moderate adjustment rather than a significant or rapid decrease.
Against this backdrop, Euro zone bond yields declined, with data highlighting ongoing weakness in factory activity within the bloc and a contraction in the United States during May. This development spurred gains in interest rate-sensitive sectors such as real estate, telecommunications, and utilities.
However, energy stocks experienced a setback, declining by 0.7 percent in tandem with falling oil prices. Meanwhile, British pharmaceutical company GSK witnessed a significant downturn, plummeting by 9.2 percent after a judge in the US state of Delaware allowed more than 70,000 lawsuits related to the discontinued heartburn drug Zantac to proceed. This development exerted downward pressure on the healthcare sub-sector index, which declined by 0.3 percent.
Additionally, shares of troubled information technology company Atos also tumbled by 18 percent, further contributing to the mixed performance observed across European stock markets. As investors await further developments, market participants continue to monitor economic indicators and central bank policies for potential impacts on investment decisions and market dynamics.
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