FX.co ★ European markets retreat after Monday's upsurge

Major European indexes retreated on Tuesday after closing in positive territory on Monday.

At the time of writing, the STOXX Europe 600 fell by 0.85% to 432.85 points. Over the past week, the European index lost 0.6% due to investor anxiety about global economic growth amid rising inflation, monetary tightening by major central banks, the conflict in Ukraine, and the lockdowns in China.

The CAC 40 decreased by 1.3%, the DAX retreated by 0.9%, and the FTSE 100 fell by 0.7%.

Biggest gainers and losers

Shares of French aircraft engine manufacturer Safran S.A. has lost 2.8%.Air France-KLM decreased by 7% on the announcement of a €2.26 billion share sale. The airline is set to issue 1.93 billion new shares.

The market capitalization of Siemens Energy slid down by 0.03% following the news about the company's restructuring.

Drax Group PLC slumped by 18% after Citi downgraded it from "buy" to "neutral".

Factors influencing the market's downturn

Market players have become more risk-averse amid overall uncertainty. As a result, key European indexes lost all gains they had made on Monday.

According to preliminary data, EU's composite PMI fell by 54.9 in May from 55.8 in April. Economists expected the index to decrease to 55.3 points. Weak PMI data has negatively affected the European stock market.

France's business confidence index declined to a 14-month low of 106 in May, down from 108 in April. Analysts predicted the index to reach 107 points.

This week, investors are focusing on the results of the World Economic Forum in Davos, where global economic growth prospects are discussed. Furthermore, on Wednesday, the Federal Reserve will release its May meeting minutes, which will clarify the Fed's monetary tightening plans.

Monday's trading session

On Monday, major European indexes closed in positive territory, as shares in the banking sector rallied.

As a result, the STOXX Europe 600 gained 1.26% and reached 436.54 points.On the STOXX Europe 600, the best performing stocks were Virgin Money UK PLC (+8.2%) and Powszechny Zaklad Ubezpieczen (+7.2%).

The worst performing stock was Vifor Pharma, which lost 8.3%.

The CAC 40 increased by 1.17%, while the DAX and FTSE 100 advanced by 1.38% and 1.67%, respectively.

On Monday, shares of Siemens Energy decreased by 0.7% following the news that the company launched a bid for minority holdings in Siemens Gamesa Renewable Energy SA. Currently, Siemens Energy owns a 67% stake in the wind turbine manufacturer. As a result, shares of Siemens Gamesa jumped by 6.2%.

Factors behind Monday's uptrend

European markets found support in investor expectations of an interest rate hike by the ECB in July, which pushed the banks index up by 2%.

As a result, shares of Commerzbank, Deutsche Bank, Societe Generale, and Credit Agricole surged upwards by 6.6%, 7%, 4.3%, and 3.8% respectively.

Additional support came from German statistics data. The IFO business climate index unexpectedly increased to 93 points in May from 91.8 points in April, despite anxiety over rising inflation and the war in Ukraine. The index was expected to fall to 91.4 points.

The FTSE 100 was also affected by good performance of UK companies. Shares of Kingfisher jumped by 2.2% as the British home improvement retailer released strong first quarter results, maintaining its fiscal year forecast. Furthermore, the company announced a share buyback program.