European stock markets have managed to regain some stability after last week’s significant downturn, with investors closely monitoring the political scene as the French parliamentary elections draw near.
Following a turbulent period, European indices showed signs of recovery.
This week’s performance indicates a possible easing of the risk-averse sentiment that gripped investors. Notably, French government bonds remained steady after the first sale since President Macron called for snap elections, hinting at a more stable outlook.
In the United States, markets continued their upward trajectory, buoyed by the surge in AI stocks, while Asian markets exhibited mixed results over the week.
Oil prices have surged to their highest in nearly two months, driven by optimistic demand forecasts and a notable decrease in US inventory data. Both Brent and WTI futures are on track for a second consecutive week of gains, rising 3.8 percent and 4.1 percent, respectively. This uptick has positively impacted shares of major oil companies like Shell and BP.
The Bank of England decided to keep its policy rate at 5.25 percent, aligning with expectations, and a rate cut is anticipated in August as inflation in the UK dropped to the 2 percent target in May.
The Swiss National Bank implemented its second rate cut, lowering the interest rate to 1.25 percent, maintaining its leadership in reducing rates among global central banks. Meanwhile, Norway’s central bank held its rate steady at 4.5 percent, signaling no changes until year’s end.
Following the European Central Bank’s rate reduction, it’s expected that more central banks will begin easing their monetary policies. Such moves are typically seen as favorable for equity markets.
European benchmark indices had mixed results over the week: the Euro Stoxx 600 rose by 0.31 percent, the DAX fell by 0.15 percent, the CAC 40 declined by 0.48 percent, and the FTSE 100 increased by 1.33 percent. Bank and energy stocks led the gains, reflecting improved sentiment. Over the past week, HSBC increased by 2.4 percent, UBS by 0.32 percent, Shell by 0.87 percent, and BP by 1.31 percent. ASML shares also climbed 0.61 percent, benefiting from the AI stock surge on Wall Street.
However, luxury consumer stocks struggled, primarily due to price cuts in China. LVMH and Christian Dior each dropped 3 percent, Richemont fell 6 percent, and L’Oréal decreased by 2.7 percent. French markets, particularly banking and renewable energy stocks, faced pressure with BNP Paribas down 2.5 percent, TotalEnergies down 2.4 percent, and Crédit Agricole falling 4.2 percent.
In the currency markets, the euro held steady against the US dollar, remaining slightly above 1.07, and strengthened against the British pound after the BOE’s rate decision, with markets anticipating a potential rate cut in August.