Pranav Kashyap and Lisa Pauline Matakkal
(Reuters) – European stocks rose on Monday, recovering from a sharp sell-off last week as investors focused on expectations of an interest rate cut by the European Central Bank on Thursday.
The pan-European STOXX 600 index ended up 0.8% after falling 3.5% the previous week, its worst week since March 2023, as investors worried about slowing global growth sought safer assets.
Major regional bourses rose between 0.7 and 1 percent on Monday, with French shares leading the gains.
Euro zone investor sentiment fell for a third straight month in September to its lowest level since January, data released on Monday showed, highlighting persistent economic worries within the bloc.
All eyes will be on the European Central Bank's interest rate decision on Thursday. Markets are widely expecting the central bank to ease policy by 25 basis points and will be watching to see whether ECB President Christine Lagarde gives any signal about the possibility of further rate cuts this year.
“The easing in labour market and economic activity since the June meeting should boost confidence that the process of containing inflation is on track, particularly given the slowdown in wage growth,” Danske Bank analysts said.
“We expect Lagarde to acknowledge that the Fed is entering a phase of rate cuts, but we do not expect her to commit to a specific timeline for further rate cuts.”
In addition to central bank meetings, a host of economic data is due to be released, including inflation rates in the United States, Germany, Spain and France, as well as UK gross domestic product (GDP).
US inflation data will be closely watched for further signals on whether the Federal Reserve, which meets later this month, will ease monetary policy by 25bps or 50bps.
Real estate stocks took a breather, declining 0.2% after rising 4% last week, but otherwise the STOXX 600 sector indexes were all positive.
Travel and leisure outperformed other sectors, rising 2.1 percent. British gambling group Entain rose 5.3 percent after it said online revenue growth in the early second half of 2024 beat expectations.
Adidas shares fell 3% after Barclays downgraded the stock to “equal weight” from “overweight.”
Ubisoft Entertainment Inc. slumped 7 percent to become the lowest-performing stock on the STOXX 600 index after Cantor Fitzgerald downgraded the company's shares to “neutral,” traders told Reuters.
Meanwhile, Sofina shares rose about 12% after the company launched a second round of share repurchase programs.
(Reporting by Pranav Kashyap in Bengaluru; Editing by Irene Soren, Mrigank Dhaniwala and Christina Fincher)
