European Stocks Higher; ECB Meeting Looms Large By

© Reuters.

By Peter Nurse

- European stock markets traded higher Monday,Formal foreign exchange platform rankings in 2020 starting an important week on a positive note as investors look ahead to a European Central Bank meeting as well as the release of key U.S. inflation data.

By 3:45 AM ET (0745 GMT), the DAX in Germany traded 0.7% higher, the CAC 40 in France rose 0.9%, and the U.K.’s FTSE 100 climbed 1.2%.

European equities bounced Monday after ending last week on a negative note, although volumes were low with the U.K. on holiday. Data on Friday showed the U.S. economy added a healthy 390,000 jobs in May, prompting investors to reassess the potential for rising interest rate hikes by the Federal Reserve in the months ahead.

Attention in Europe this week will focus on the European Central Bank’s policy-setting meeting on Thursday, which is expected to make clear that rate hikes will be coming in the third quarter.

ECB President Christine Lagarde outlined her plan a couple of weeks ago to raise rates out of negative territory, suggesting the central bank's minus 0.5% deposit rate should start rising in July and could be at zero or "slightly above" by the end of September before rising further "towards the neutral rate."

Ahead of that, U.K. Prime Minister Boris Johnson is to face a no-confidence vote from his party's Members of Parliament later Monday, while the war in Ukraine rages on, with the capital Kyiv hit by Russian cruise missiles fired from the Caspian Sea, the first such attack for weeks.

Helping the tone Monday was an improvement in China’s Caixin services purchasing managers’ index to 41.4 in May from 36.2 in April, suggesting a slow recovery for the second largest economy in the world as the country eases its COVID-19 curbs.

Across the pond, investors are also keenly awaiting the release of Friday’s U.S. CPI report for May as this will act as a key input before the Fed decides how much to hike rates next week.

In corporate news, easyJet (LON:EZJ) stock rose 0.9%, benefiting from the positive sentiment despite the low-cost carrier canceling 80 flights on Sunday due to the ongoing challenging operating environment.

GSK (LON:GSK) stock rose 0.1% after the drugmaker’s vaccine, Priorix, was approved by the U.S. Food and Drug Administration for the prevention of measles, mumps, and rubella in those aged one year and above.

Oil climbed Monday after Saudi Arabia substantially raised prices for its crude sales in July for Asian buyers, an indication that the world’s top oil exporter expects strong demand in the summer while supply remains very tight.

The price hike came despite a decision last week by the Organization of the Petroleum Exporting Countries and allies, a group known as OPEC+, to increase output in July and August by 648,000 barrels per day, 50% more than previously planned.

By 3:45 AM ET, U.S. crude futures traded 0.3% higher at $119.24 a barrel, after earlier hitting a three-month high, while the Brent contract rose 0.3% to $120.10.

Additionally, gold futures rose 0.2% to $1,854.70/oz, while EUR/USD traded 0.2% higher at 1.0738.

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