European stock markets fell Monday, starting the new week on a downbeat note with investors fretting about the state of the global economy and the likely policy responses.
At 03:05 ET (08:05 GMT), the DAX index in Germany dropped 0.3%, the CAC 40 in France slipped 0.3% and the FTSE 100 in the UK fell 0.3%.
Central banks in focus
European equities closed lower on Friday after a stronger-than-expected US jobs report added to concerns that the Federal Reserve would proceed with caution when it comes to further interest rate cuts.
This negative sentiment has continued Monday, with investors starting to fret that the next move by the Fed may be to raise interest rates, especially if President-elect Donald Trump goes through with his proposed policies of mass trade tariffs and tax cuts.
The European Central Bank, by contrast, can ease policy further this year but must find a middle ground that neither induces a recession nor causes an undue delay in curbing inflation, ECB chief economist Philip Lane told an Austrian newspaper.
The ECB cut interest rates four times last year and markets see another four steps this year.
“If interest rates fall too quickly, it will be difficult to bring services inflation under control,” Der Standard quoted Lane as saying on Monday.
“But we also don’t want rates to remain too high for too long, because that would weaken the inflation momentum in such a way that the disinflation process would not stop at 2% but inflation could materially fall below target,” Lane added.
Inflation data on tap
There’s little in the way of economic data to digest on Monday, but a lot of focus will be on Wednesday’s US CPI data after minutes from the Fed’s December meeting, released last week, showed policymakers remain concerned over inflationary pressures.
There is also inflation data in Europe to study, with the UK CPI also due on Wednesday. This will be studied carefully after last week’s selloff in UK government bonds, known as gilts, over concerns about the state of the country’s finances.
GSK on acquisition trail
In corporate news, GSK (LON: GSK) stock fell 0.7% after the British drugmaker said it would pay up to $1.15 billion to buy Boston-based biopharmaceutical firm IDRx, which is developing a treatment for a rare tumour.
Porsche (ETR: PSHG_p) stock rose 1.5% even after the German sports car manufacturer reported a 28% tumble in 2024 China sales on Monday.
Across the pond, JPMorgan (NYSE: JPM), Wells Fargo (NYSE: WFC), Citigroup (NYSE: C) and Goldman Sachs (NYSE: GS) will kick off fourth-quarter earnings on Wednesday, while Bank of America (NYSE: BAC) and Morgan Stanley (NYSE: MS) report results on Thursday.
Crude rises on Russian sanctions
Oil prices climbed strongly on Monday, continuing last week’s gains after the announcement of additional US sanctions on Russian producers and ships. These sanctions could potentially serve as a major logistical headwind to crude flows.
By 03:05 ET, the US crude futures (WTI) climbed 1.5% to $76.90 a barrel, while the Brent contract rose 1.6% to $81.06 a barrel.
Both contracts have risen by more than 6% since the middle of last week, when the wider sanctions on Russian oil were first mooted, before being confirmed on Friday.
The new sanctions included producers Gazprom (MCX: GAZP) Neft and Surgutneftegas, as well as almost 200 vessels that have shipped Russian oil, likely pushing China and India, the world’s top and third-largest oil importers respectively, to source more crude elsewhere, boosting prices and shipping costs.
