European shares rose in the primary trading session of 2023 on Monday as euro zone manufacturing data suggested the worst had passed after a yr marred by fears of a recession as central banks hiked rates globally.
The pan-regional STOXX 600 rose 0.8%, supported by consumer discretionary stocks. The automobiles and parts sector gained 2.5% and luxury names like LVMH and Kering added about 1.5% each.
“With 10-year bund yields above 2.50%, relaxed year-end trading and the probable drop in HICP inflation are raising hopes for an upbeat start into the yr,” Commerzbank Research analysts said in a note, referring to the euro zone consumer prices inflation data due later this week.
An early indicator was data showing the downturn in euro zone manufacturing activity has likely passed its trough as supply chains begin to get better and inflationary pressures ease, resulting in a rebound in optimism amongst factory managers.
The STOXX 600 ended 2022 with sharp losses, driven by central banks’ aggressive policy tightening to rein in soaring prices, an economic slowdown, the Russia-Ukraine conflict that fanned inflationary pressures and growing concerns over COVID cases in China.
Rate-sensitive technology stocks, among the many worst-performing shares last yr, rose 1.5% on the day, despite more hawkish signals from the European Central Bank.
ECB President Christine Lagarde said euro zone wages are growing quicker than earlier thought and the central bank must prevent this from adding to already high inflation.
Bond yields of Europe’s largest economy, Germany, dropped from their highest levels in greater than a decade as investors braced for inflation data this week.
Germany’s finance minister expects inflation in Europe’s biggest economy to drop to 7% this yr and to proceed falling in 2024 and beyond, but expects high energy prices to be the brand new normal.
The German DAX gained 1.0%, while other European exchanges also began the yr on a positive note. The London and Dublin stock exchanges are closed for the Recent Yr’s day holiday.
The energy sector added 1.3%, tracking firm crude prices.
Croatia rang in the brand new yr with two historic changes, because the European Union’s youngest member joined each the EU’s border-free Schengen zone and the euro common currency.
