Europe’s main stock index, the STOXX 600, closed lower on Tuesday after a five-day winning streak, with energy stocks dragging down the market. This decline comes as investors assess domestic economic data and prepare for a meeting of central bankers in Jackson Hole later in the week. The early drop in oil prices caused the energy sector to fall 2%, though prices gradually picked up throughout the day. Despite this setback, a Reuters poll shows that European shares are expected to rise modestly by year-end, thanks to central bank interest rate cuts, even though there is still caution among strategists.
Both the STOXX 600 and blue-chip STOXX50E have seen gains of over 7% so far this year, despite a recent bout of volatility that saw the benchmark index slip below the crucial 500-point mark due to concerns over a potential U.S. recession. The Goldilocks thematic and expectations of the Fed pivoting closer are contributing to a risk-on sentiment, according to OCBC strategists. However, investors are still keeping an eye out for the Fed’s July policy meeting minutes on Wednesday and comments from Chair Jerome Powell at the Jackson Hole conference on Friday.
Concrete hints on U.S. rate cuts are expected to provide a boost to risk assets globally, as fears over the world’s largest economy’s performance appear to have eased. In terms of individual stock movements, SalMar dropped 7.4% after posting below-estimate operating profit and cutting its Iceland harvest outlook. BT also fell 6.4% due to competition from internet provider CityFibre, and Danish medical equipment maker Coloplast lost 5% after reporting third-quarter earnings. On the bright side, luxury and automobile stocks performed well.
In Sweden, the central bank lowered its key rate as expected and hinted at the possibility of up to three more cuts before year-end if price pressures do not pick up. Despite this, Swedish shares fell 0.5%, ending a five-day gaining streak. Meanwhile, German producer prices decreased by 0.8% in July, matching expectations. Overall, investors are bracing for more volatility in the market as central bank decisions and economic data continue to influence stock prices. As global uncertainties persist, the stock market will likely see further fluctuations in the near future.
