Europe stocks gain as oil prices retreat

Bloomberg

European stocks began the week on a positive note, with sentiment buoyed by lower oil prices, as investor attention turns to the Federal Reserve for clues on how aggressively it will tighten monetary policy.
The Stoxx 600 was up 1.1% as of 9:13 am in London with automakers and banks leading gains, while miners and energy stocks underperformed as oil declined to below $110 a barrel.
The benchmark index snapped a three-week losing streak, partly as dip buyers returned following days of volatility on concerns of slowing economic growth amid Russia’s invasion of Ukraine.
The focus this week will be on the Federal Reserve’s policy meeting, where traders are expecting the central bank to raise interest rates by a quarter percentage point to rein in red-hot inflation. Overall,
futures are expecting the Fed to deliver the equivalent of
at least six-quarter point
increases this year.
“The Fed meeting this week is the big catalyst investors are now looking out for and it’s difficult to overestimate its importance,” said Roger Lee, head of UK equity strategy at Investec. “A 25-basis-point interest-rate hike is a given, but it’s the comments about quantitative tightening that will be key for markets.”
With the Ukraine war sending commodity prices soaring amid worries of a supply crunch, strategists have warned the selloff in equity markets could worsen, adding that Europe was the most exposed due to its geographical proximity to the war and its energy dependence on Russia.
Deutsche Bank strategists said their measure for equity positioning in Europe was at its lowest since September 2020 — a stunning reversal from being near a historical peak in late December 2021 — as regional equity funds see “massive outflows comparable to the worst seen during the European financial crisis.”
Among individual movers, Sanofi sank after its experimental cancer medicine failed in an intermediate clinical test for breast cancer, while tech investor Prosus NV tumbled following a continued selloff in Chinese technology shares.