Big week for earnings and monetary policy

LONDON – European markets were mixed on Monday as investors braced for a big week of corporate earnings and a major monetary policy decision from the US Federal Reserve.

The pan-European Stoxx 600 index hovered around the flat line by mid-morning, after initially dropping more than 0.4% in early trading. Banking shares jumped 1.8 percent, while travel and leisure stocks fell 0.7 percent.

Much of this week’s focus will be on the US Federal Reserve’s two-day monetary policy meeting, which concludes on Wednesday, with economists widely expecting a 75 basis point interest rate hike by the central bank.

Last week, the European Central Bank began its walking cycle with a 50 basis point increase, larger than previously expected.

Robert Holzmann, policymaker at the hawkish European Central Bank, told Austrian radio on Sunday that the Governing Council will look at the economic landscape across the eurozone before deciding whether a significant rate hike will be possible in September.

Stocks in the Asia-Pacific region mostly fell overnight as concerns about a global economic slowdown curbed a recent return to risk sentiment for investors, with traditional safe-haven bonds and the dollar finding big bids.

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US stock futures were partially lower in early pre-market trading, as it marked a positive week on Wall Street as traders brace for a barrage of corporate earnings and assess the path of future Fed rate hikes.

Corporate earnings will also be a major driver of stock market movement in Europe, with UBS, Unilever, LVMH, Credit Suisse, Deutsche Bank, Daimler, Shell, Barclays, Nestle and Renault among the major players reporting throughout the week.

Notable earnings before the bell on Monday came from Ryanair, Vodafone, Philips, Faurecia and Julius Baer.

Philips shares fell 11% by mid-morning after the Dutch medical equipment company missed its core second-quarter earnings forecast by a large margin and cut its full-year and mid-range earnings forecast.

At the top of the Stoxx 600, French auto parts supplier Faurecia climbed more than 5% after a solid batch of first-half results.

On the data front, a key business climate index for July from Germany’s Ifo institute came in at 88.6 on Monday, its lowest level in more than two years, as business sentiment dented as a result of higher energy prices and impending gas shortages.

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