European stocks rose on Monday as China’s stimulus measures to lift its equity market boosted risk sentiment, while investors considered the outlook for interest rates after cautious remarks from Federal Reserve Chair Jerome Powell.
The Stoxx 600 Index was up 0.9% by the close, its biggest one-day gain in a month. Asian stocks had rallied earlier in the day after China cut stamp duty on stock trades for the first time since 2008 and pledged to slow the pace of initial public offerings. Technology and construction stocks led the gains in Europe as all industry sub-indexes advanced.
Stock markets in the UK were closed for a local holiday. Among individual movers, Valneva SE gained as it reported positive initial Phase-3 safety data in adolescents for its single-dose chikungunya virus vaccine candidate.
A rally in Europe’s benchmark index has stalled this month as worries about persistently hawkish central banks lifted bond yields. With technical indicators flashing bearish signals — such as the failed break-out in July and the current short-term downtrend — the momentum for stocks now looks negative.
Ulrich Urbahn, head of multi-asset strategy and research at Berenberg, said that while the new stimulus measures from China should boost stocks in the short term, US labor market data this Friday will have a strong bearing on the market. “Central banks remain data-dependent, which makes the outlook more uncertain,” Urbahn said.
Trading could also be more volatile from here on as, starting Monday, Deutsche Boerse AG’s Eurex listed Euro Stoxx 50 derivatives that expire every weekday, following US peers who introduced the now-booming contracts tied to the S&P 500 last year. Every trading session, investors in Europe will be able to buy and sell derivatives expiring the same day, known as zero-days-to-expiration contracts, or 0DTE.
For more on equity markets:
- Wall Street’s Hot Options Come to Europe. Will They Take Off?
- Investors Return to Parsing the Macroeconomic Data: Taking Stock
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--With assistance from Jan-Patrick Barnert.
