European shares edged higher on Monday after a strong week driven by aggressive bets on interest rate cuts, while drugs-to-pesticides group Bayer posted its worst day ever weighing on the healthcare sector and Germany’s benchmark index.
The pan-European Stoxx 600 inched 0.1 per cent higher after jumping nearly 3 per cent last week.
As investors started pricing in 100-basis-point rate cuts for 2024 with the first one seen as soon as April, European Central Bank officials shunned market optimism, flagging still-high inflation and a somewhat resilient economy.
“Markets are definitely jumping the gun. There’s going to be a continuous repricing of expectations about that first rate cut- the most important one because of that shift in mentality from central banks,” Daniela Hathorn, senior market analyst at Capital.com.
Paddypower Betfair owner Flutter continues to regain lost ground since lowering its full-year forecasts in early November. The gambling giant’s shares rose by 2.6 per cent to €148.80. Iseq heavyweight Ryanair was down 1.2 per cent at €17.26 as oil prices advanced on the back of expected cuts by Opec.
The State’s two main Irish banks, Bank of Ireland and AIB, also saw gains on Monday, with both shares rising 0.9 per cent, but rival PTSB lost ground, falling nearly 3 per cent to €1.71. Packaging giant Smurfit Kappa had a poor session, dropping nearly 3 per cent to €30.84. The index’s two main food companies Kerry and Glanbia also lost ground.
Energy stocks led sectoral gains, climbing 1.3 per cent tracking firm crude prices as further supply cuts in OPEC+ production are expected in the coming weeks. The healthcare sector eased 0.4 per cent after Bayer fell 18 per cent briefly hitting its lowest level in 14 years after aborting a large late-stage trial testing a new anti-clotting drug.
Germany’s Dax slipped 0.1 per cent. Meanwhile, data from the region showed producer prices fell along expectations in October, continuing a downward trend after September’s record fall. Italian bank stocks gained after Moody’s upgraded the outlook for the country’s sovereign debt in an unexpected boost for prime minister Giorgia Meloni’s government. The FTSE MIB inched 0.2 per cent up. The risk premium investors ask to hold Italian and Portuguese sovereign debt also fell, reflecting some relief.
Meanwhile, Spain’s IBEX 35 added 0.8 per cent extending gains for its sixth straight session. Julius Baer dropped 12 per cent after the Swiss bank dampened profit expectations, while Austrian sensor maker AMS Osram lost 4.9 per cent after announcing terms of a fully underwritten rights issue.
UK’s FTSE 100 dipped on Monday, weighed by a stronger pound and a slide in shares of equipment rental firm Ashtead Group, while investors looked forward to a budget update later in the week. The blue-chip FTSE 100 fell 0.1 per cent as the pound strengthened 0.3 per cent, touching a two-month high earlier in the session.
Ashtead Group dived 10.5 per cent, logging its biggest single-day percentage drop in nearly four years after saying its annual profit would come in below market expectations. Helping limit losses, heavyweight energy stocks added 1 per cent, tracking a more than 2 per cent jump in crude prices. The domestically-focussed FTSE 250 index, on the other hand, ended 0.2 per cent higher. Meanwhile, British prime minister Rishi Sunak said his government would turn to cutting tax after a fall in inflation, speaking ahead of this week’s budget update when finance minister Jeremy Hunt is expected to announce how he will speed up the stagnant economy.
The Nasdaq led gains among the main US stock indexes on Monday as Microsoft climbed on news that ousted OpenAI head Sam Altman will join the software giant, while investors awaited more clues on when the Federal Reserve might begin cutting interest rates.
Microsoft’s shares touched an all-time high and were last up 1.6 per cent after chief executive Satya Nadella said Altman is set to join the company to lead a new advanced AI research team.
The S&P 500 information technology sub-index housing the stock was the top sectoral gainer, up 0.9 per cent.
Most other megacap stocks, including Nvidia and Apple, also edged higher.
Wall Street’s main indexes have staged a stellar rebound in November, posting gains for the third week in a row on Friday as evidence of easing US inflation supported bets that the Fed was done raising interest rates.
The benchmark S&P 500 is now less than 2 per cent away from its highest level this year reached in July.
“This is traditionally a very light week. There’s really not much in the way of economic news and I don’t think we could see much of a change between now and the end of the year,” said Joe Saluzzi, partner and co-founder at Themis Trading in Chatham, New Jersey. – Additional reporting by Reuters