Markets hit by energy and inflation concerns
European stocks dropped to their lowest levels in over two months on Monday as a sharp rise in oil prices intensified fears of higher inflation. The pan-European STOXX 600 index fell for a third consecutive session, declining 1.8% by 09:27 GMT (11:27 Cyprus time). Last week, the index fell 5.5%, marking its worst weekly performance in nearly a year.
Energy costs pressure markets
Europe relies heavily on imported oil and liquefied natural gas, with oil prices surging more than 25% to just under $120 per barrel. Prolonged conflict in the Middle East could further increase energy and transport costs, adding pressure to already fragile economic growth.
The German DAX fell to a ten-month low, while Milan and Madrid dropped to three-month lows. Paris hit a five-month low, and London recorded its weakest level in a month. In contrast, Oslo extended gains for a fourth consecutive session.
Sector performance and corporate losses
All major European sectors traded in negative territory. Banking shares, which led last week’s sell-off, dropped 3.2%. Key resources and interest-rate sensitive real estate stocks fell by 3.1%. Airline stocks were particularly hit, with Lufthansa down 3.9% and Air France-KLM falling 4.1% due to rising fuel costs.
Energy stocks rose, and Italian defence company Leonardo gained 2.5%. Meanwhile, Roche shares dropped 4.6% after its breast cancer drug failed a clinical trial.
Economic indicators and ECB focus
German industrial orders declined more than expected in January. Investors are awaiting consumer price data from several EU countries later in the week to assess inflation trends. Expectations of higher interest rates pushed European bond yields to their highest levels in a year, with markets now pricing in a 25-basis-point increase from the European Central Bank in July.
ECB board member Isabel Schnabel warned that geopolitical instability poses upward inflation risks and requires vigilance from policymakers. Attention will also focus on comments from ECB President Christine Lagarde, board member Piero Cipollone, and eurozone finance ministers later in the day.
Also read: Oil prices surge above $100 a barrel for the first time since 2022
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