European stocks stabilized after experiencing their largest drop since March last week. Investors are now preparing for the upcoming earnings season and anticipating the release of US inflation figures, which are expected to indicate a cooling of prices. The Stoxx Europe 600 index closed slightly higher, recovering from earlier losses. Travel and leisure companies saw gains, while utilities and property firms lagged behind. Ryanair shares increased by almost 1%, bringing their total gain for the year to 37%. Bayer also experienced a rise in share price following reports that CEO Bill Anderson is considering a potential spinoff of the company’s agricultural chemicals business through a stock exchange listing.
The second half of the year has been challenging for European equities due to concerns about rising interest rates and slowing economic growth. The chief economist of the Organisation for Economic Cooperation and Development (OECD) has stated that the European Central Bank faces a difficult task in deciding when to halt rate hikes. Traders are now closely watching the earnings season to evaluate how companies have navigated headwinds such as higher interest rates and a decline in Chinese demand. The release of US inflation data on Wednesday will also be significant for market trends.
Joachim Klement, head of strategy at Liberum Capital, predicts that markets may experience some stabilization this week, driven by positive inflation data from the US. However, he also expects companies to provide a pessimistic outlook for the second half of the year during the earnings season, which could continue to exert pressure on share prices in the short term. Nevertheless, Klement believes that the market will eventually recover.