European Stocks Firm Despite Anxiety Over Fed

European stocks remained firm on Monday, betting on monetary policy forbearance by central banks till firmer economic rebound was in place and thus allowing benchmark indexes to tread higher than Friday’s levels. European Central Bank President’s comments on continuance of stimulus till economic recovery proved sustainable supported the rally, despite the impending review of Federal Funds Rate by U.S FOMC later in the week. Market sentiment was also supported as Eurozone Industrial Production for April recorded 39.3 percent growth as against the forecast of 37.4 percent.

Germany’s DAX 30 rose to an all-time high of 15802 in early trade and is currently trading at 15748, an addition of 0.35 percent from Friday’s close. Siemens Energy has risen more than 3.7 percent whereas Delivery Hero has rallied more than 2.7 percent. Covestro has declined around 0.88 percent. SAP is currently leading in volumes with a turnover of 50.34 million euros.

U.K.’s FTSE 100 is currently trading near 7162 after rising 0.40 percent from Friday’s close despite potential delay of one month to lifting of lockdown restrictions. BT group is leading the rally having risen more than 2 percent. Royal Dutch Shell has rallied more than 2 percent over reports of likely sale of some oil-field assets in the U.S as well as due to the high oil prices. Rolls Royce Holdings has declined by more than 2.5 percent. Travel and Hospitality stocks are witnessing selling pressure in the context of the likely extension to relaxation of lockdown restrictions.

France’s CAC 40 is 0.22 percent higher from previous close and trading at 6615, near twenty-year highs. Worldline has moved up by close to 2 percent whereas Dassault Systemes has gained more than 1.7 percent. Valeo has declined by 0.73 percent.
Switzerland’s SMI 20 is following the flat-line with an uptick of 0.05 percent and trading near 11840. Adecco has gained 1.50 percent whereas Swatch has declined around 1 percent.

Pan-European STOXX 600 has added around half a percentage point to its previous close and is currently trading near 460 levels.

On Friday, the CAC 40 had added 0.83 percent to close at 6601, the highest level since September 2000, FTSE 100 had gained 0.65 percent to close at 7134, the highest level since February 2020, pan-European STOXX 600 had moved up 0.65 percent to close at 457.51, DAX 30 had gained by 0.78 percent to close at 15693, near an all-time high, and the Swiss SMI had increased 0.26 percent to close at 11841. However the sentiment at Wall Street was more cautious ahead of the FOMC and Nasdaq 100 had moved up by 0.27 percent to close at 13998 and the Dow Jones Industrial Average had remained more or less flat at 0.04 percent to close at 34480.

Markets await the speech by BOE Governor later in the day to get cues on central bank thinking especially in the context of recent inflation spikes and the resurgence in economic activities.

On the data horizon are Tuesday’s inflation data for May from Germany, France and Italy, Unemployment Claimant Data for May from Great Britain, Balance of Trade for April from Euro Area, SECO Economic forecasts from Switzerland, Q1 GDP Numbers from Russia and Retail Sales for May from the U.S. On Wednesday, Annual inflation Rate for the month of May will be released by Great Britain’s Office for National Statistics but the more decisive event for the markets could be the U.S Federal Reserve’s meeting on the same day to review the Federal Funds Rate as well as FOMC projections. Though markets are yet to discount the possibility of the Fed utilizing any available headroom for rolling back monetary stimulus without jeopardizing economic recovery, any indication in that direction could hurt stocks, irrespective of geography.

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