European equity markets opened the week largely unchanged and hovered close to recent record territory as investors digested last week’s rally and prepared for a busy calendar of policy commentary and economic releases later in the week.
The pan-European STOXX 600 began trading near its highs, with recent momentum attributed to a broad-based rotation across sectors. Market participants pointed to signs of easing inflationary pressures and a weakening U.S. labor market as central to rekindling hopes that global interest rate pressures could be on a gentler path.
Major benchmarks were broadly flat at the start of the session - Germany’s DAX, France’s CAC 40 and London’s FTSE 100 showed little net movement.
European markets delivered strong performances in the prior week. Both the STOXX 600 and the Euro Stoxx 50 reached fresh all-time levels, while Germany’s DAX outperformed peers. The DAX’s advance was underpinned by notable recoveries among large-cap names such as Siemens and by an expansion in investor interest that reached beyond the technology sector.
Market sentiment was also influenced by recent U.S. data and energy price moves. Softer-than-expected employment figures from the United States raised the prospect that the Federal Reserve might pause further tightening, bolstering global equities. In addition, a recent decline in crude oil prices helped to reduce concerns about prolonged energy-driven inflationary pressure that had risen earlier in the year amid geopolitical tensions in the Middle East.
Flows into cyclical areas were pronounced last week, with manufacturing, industrials and financials receiving strong investor attention.
Looking ahead, investors are preparing for the release on Wednesday of the minutes from the Federal Reserve’s most recent policy meeting. The minutes are widely expected to reflect a relatively hawkish stance given that nine Fed officials had previously projected at least one additional rate increase this year. Analysts note, however, that those internal projections predate the recent slide in crude oil prices, which could influence the outlook for inflation.
The week’s schedule also features a string of central bank speakers whose remarks will be closely monitored. Speeches from Federal Reserve Board Governor Christopher Waller, European Central Bank President Christine Lagarde, and ECB board members Isabel Schnabel and Philip Lane are all slated to draw scrutiny from markets.
On the macroeconomic front, the Eurozone will produce a number of key releases that should shed light on regional demand and production dynamics. Headline data to watch includes May retail sales and producer prices for the Eurozone, together with German industrial output for May. These figures are expected to provide further clarity on whether the region’s manufacturing sector is beginning to recover from a recent soft patch and whether consumer spending is stabilizing.
At the single-stock level, Easyjet was a notable mover, jumping nearly 10% after accepting a takeover proposal from Castlelake.
Investors will be parsing the Fed minutes and central bank commentary carefully for signals on the path of policy, while the Eurozone releases will be evaluated for signs of improvement in manufacturing and consumer demand.