Key points
- European markets opened higher, with the DAX, CAC 40, and FTSE 100 showing gains.
- Investors await key decisions from the Federal Reserve, Bank of England, and other central banks.
- Hopes for a Fed interest rate cut fuel optimism, following recent weaker economic data.
- China’s factory output and retail sales show the weakest growth since 2024, impacting sentiment.
European stock markets started the week on an upbeat note, with indices in Germany’s DAX, France’s CAC 40, and the UK’s FTSE 100 recording modest gains. This positive sentiment comes ahead of a series of crucial central bank meetings, most notably the Federal Reserve’s decision on interest rates.
The anticipation surrounding the Fed’s move is particularly significant, as recent economic data pointing towards a cooling labor market and subdued inflation has fueled speculation of a potential rate cut. This expectation has already propelled major US indices to record highs last week.
However, the Fed is not the only central bank in the spotlight; the Bank of England, along with central banks in Japan, Canada, and South Africa, are also scheduled to announce their monetary policy decisions this week.
The positive market mood is tempered somewhat by concerning economic news from China. Data released showed both factory output and retail sales posting their weakest year-on-year growth since August 2024, suggesting a slowdown in the world’s second-largest economy. This weaker-than-expected performance in China dampened overall investor sentiment to a degree.
In contrast, positive corporate news emerged from Europe. German defense giant Rheinmetall announced its acquisition of Luerssen Group’s shipbuilding arm, marking a significant expansion into the naval construction sector. Meanwhile, UK online retailer AO World reported strong first-half revenue growth, prompting a raised profit forecast and its first-ever share buyback program.
The oil market also experienced upward momentum, driven by concerns over potential disruptions to Russian oil supplies. Recent Ukrainian drone attacks on Russian energy infrastructure, including key oil export terminals and refineries, have raised fears of significant production cuts.
This has added to the upward pressure on crude oil prices, which are currently at elevated levels. The potential for supply disruptions, particularly for major importers such as India and China, underscores the geopolitical risks that influence the energy market.
The coming week promises to be pivotal for global markets, with central bank decisions potentially impacting global financial conditions. The interplay of these monetary policy announcements, along with the ongoing geopolitical developments and economic data releases, will likely shape the market’s trajectory in the coming days.
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