European stocks fell early on Monday afternoon, as investors weighed the prospect that the world’s biggest central bank will keep interest rates on hold for longer to curb inflation.
The region-wide Stoxx 600 rose 0.2 percent, while France’s Cac 40 fell 0.1 percent. Trading activity was muted as US markets were closed for President’s Day.
However, US futures tracking the blue-chip S&P 500 fell 0.2 and the tech-heavy Nasdaq was flat.
Investors have been forced in recent weeks to review their forecasts for the peak of interest rates in the US after several reports of stronger-than-expected economic data.
The figures show that the US economy has not yet felt the Federal Reserve’s year-long efforts to curb growth and reduce inflation through an aggressive rate hike campaign. The price of sovereign debt has fallen and yields have risen in response to the data.
“There is not much on the calendar this week that has been set to end the bond market sell-off that started with the January US jobs report,” said analysts at ING. “The main hope comes from [Fed] minutes that could be a less hawkish picture, if dated, than the recent Fed speakers.
Minutes from the Fed’s January meeting will be announced on Wednesday, which could provide clues about the US central bank’s criteria for reducing rate hikes.
The dollar index, which measures the greenback against a basket of six peer currencies, was flat, while the euro fell 0.1 percent against the greenback.
The Hang Seng index finished 0.8 percent higher, while China’s CSI 300 gained 2.45 percent – its best one-day performance since late November.
Analysts at Goldman Sachs said investors welcomed stronger economic activity as China loosened its long-standing zero-Covid policy and provided more clarity on China’s stock listings in the US.
However, the bank cautioned that confidence in China’s reopening is due to many hedge funds pouring money into equities. Fund managers and owners “are somewhat hesitant to put new capital to work, especially investments with high liquidity risk premiums and long capital commitment periods, amid the uncertain US-China geopolitical environment”, he said.
In Europe, the yield on 10-year German Bunds fell 0.03 percentage points to 2.43 percent as investors debate whether the European Central Bank will follow the Fed in raising rates. Isabel Schnabel, a member of the ECB’s executive board, told Bloomberg last week that she sees a risk that the market will underestimate inflation.
Traders are also looking forward to the latest IHS Purchasing Managers’ Index, a personal measure of operating conditions in the manufacturing sector.
In Europe, the Zew and Ifo surveys, which measure confidence in the German economy, will be released on Tuesday and Wednesday, and British and German consumer confidence numbers will be published on Friday.
In the commodity market, Brent crude oil, the international benchmark, rose 1.5 percent to $84.25 a barrel. The WTI index, its US counterpart, was up 1.5 percent at $77.46 a barrel.