FX.co ★ European stocks rise dramatically on Monday

On Monday, key European stock indices increased. At the same time, the global markets continue to discuss the prospects of further monetary tightening by the US Federal Reserve amid high inflation.

At the time of writing, the STOXX Europe 600 index of Europe's leading companies rose by 0.27% to 392.35 points.

Meanwhile, the French CAC 40 gained 0.09%, the German DAX added 0.16%, and the British FTSE 100 went up 0.33%.

Top gainers and losers

The stocks of British online fashion retailer ASOS plummeted by over 11%. Earlier, the company confirmed the information about the start of negotiations with creditors to change the terms of the credit line for $394 million.

The stocks of Swiss bank Credit Suisse increased by 0.9%. On Monday, the news came that the lender had agreed to pay $495 million to settle claims by the US state of New Jersey related to the bank's mortgage stock transactions.

The market capitalization of German biopharmaceutical company MorphoSys AG soared by 8.6%.

The stocks of British financial services provider Hargreaves Lansdown PLC sank by 6%.

The stocks of Finnish telecommunications equipment maker Nokia Corp. rose by 1.6% on news that communications service provider Reliance Jio India had chosen it as one of the largest suppliers of 5G network equipment.

Market sentiment

On Monday, European stock market makers were focused on the prospects of the US Federal Reserve to tighten its monetary policy.

According to the US Labor Department data published on Thursday, annual inflation in the country slowed down to 8.2% in September from 8.3% in August. Earlier, experts had forecasted a slowdown to 8.1%.

At the same time, consumer price growth excluding food and energy prices accelerated to 6.6% in annual terms from 6.3% in August, hitting an all-time high since 1982.

Despite the slowdown in US inflation, investors continue to be concerned about the prospect of further Fed monetary policy tightening in its upcoming meetings. Economists are predicting a hike in interest rates by 0.75% in both November and December.

Notably, at the end of the two-day meeting in September, the regulator raised the range of the key rate by 75 basis points to 3.00-3.25%, the highest level since 2008. The decision was made unanimously by all 12 voting members of the Federal Open Market Committee.

Moreover, the day before, the experts of American business-focused newspaper The Wall Street Journal published a fresh regular poll. According to it, the estimation of a possible recession in the US economy grew sharply amid high inflation and permanent increase of interest rates by the US Federal Reserve.

The respondents of The Wall Street Journal believe that the possibility of recession in the United States is 63% in 2023. In addition, the psychological mark of 50% was exceeded for the first time since July 2020.

On Monday, weak performance of US stock exchanges in Friday's trading also exerted significant pressure on the European stock market. Thus, the Dow Jones Industrial Average index fell by 1.34%, the S&P 500 index dropped by 2.37%, and the NASDAQ Composite index was down 3.08%. The key indicators of the Asia-Pacific region also showed negative dynamics.

As for European news, investors awaited new UK finance minister Jeremy Hunt's speech. He was to address the House of Commons on Monday.

The day before, the news came that the Conservative Party representatives in the British Parliament called on UK Prime Minister Liz Truss to resign after some controversial economic decisions. The main claim of the Conservative Party to Truss is her recent appointment of Jeremy Hunt as new UK Treasury chief. Moreover, four finance ministers have already been replaced in the country during the year.

Previous trading results

On Friday, European stock indexes closed in the green zone, breaking a long decline. Market participants closely monitored the publication of corporate earnings reports by key European companies for the third quarter of 2022.

Consequently, the composite indicator of Europe's leading companies STOXX Europe 600 gained 0.56% and rose to 391.31 points.

The French CAC 40 was up 0.12%, the Germany DAX gained 0.67%, and the British FTSE 100 rose by 0.12%.

According to the outcome of the last week, the FTSE 100 index lost 1.9%, the DAX index added 1.3%, and the CAC 40 index was up 1.1%.

The stocks of the parent company of British postal service Royal Mail renamed as International Distribution Services PLC collapsed by 10.5%. Royal Mail posted an operating loss in the first half of 2022 and its management said it planned to lay off up to 10,000 employees by August 2023.

The stocks of Swiss financial conglomerate Credit Suisse Group AG fell by 1.2%. The day before, key US provider of financial information Bloomberg agency reported that Japanese bank holding company Mizuho Financial Group, Inc. intended to buy part of the securitized product division of Credit Suisse Group AG.

The market capitalization of French gerontology center operator Orpea Group rose by 4.9%.

The stocks of British management company Quilter Plc advanced by 5.1%.

The stocks of German energy company Uniper SE jumped by more than 5%.

Quotes of Swiss corporate software developer Temenos plummeted by 18.9% after it issued a profit warning.

The market capitalization of Dutch navigation and digital mapmaking company TomTom sank by 6% amid the publication of its financial results for the third quarter.

The stocks of British investment company Ashmore fell by 2.6%. Ashmore's assets declined by $8 billion in the first quarter amid geopolitical and economic uncertainty as well as risk aversion.

The stocks of Swedish cloud technology provider Sinch AB rose by 8.6%.

On Friday, strong performance of US stock exchanges in previous trading provided active support for the European stock market. The Dow Jones Industrial Average jumped by 2.8% on Thursday, the highest gain since November 2020. The S&P 500 rose by 2.6%, and the NASDAQ Composite added 2.2%.

On Friday, the news broke that the British government might scrap the 43 billion pounds of unfunded tax cuts included in the "mini-budget" a few weeks ago. Earlier, UK Finance Minister Kwasi Kwarteng cut short his trip to Washington and returned to London due to the end of an emergency bond purchase by the Bank of England.

According to final data from France's Insee National Statistics Office, the country's consumer prices rose by 6.2% year-on-year in September, compared to a 6.6% increase in August. The final Insee indicator for the past month was the lowest since May 2022.