European stocks rise as traders prepare for central bank meetings

European stocks rose at the open on Monday as investors prepared for a week of central bank meetings in the US and Europe and crucial economic data likely to be influential in signalling the direction of interest rates.

Europe’s region-wide Stoxx 600 rose 0.3 per cent while France’s Cac 40 added 0.5 per cent and London’s FTSE 100 advanced 0.2 per cent. 

The moves came after Wall Street rallied last Friday, with the blue-chip S&P 500 rising 0.1 per cent and consolidating its move last week into bull market territory. The tech-heavy Nasdaq Composite added 0.2 per cent.

Stocks were buoyed by bets that the Fed will resist raising interest rates when it meets on June 13-14, marking the first pause in the central bank’s 14-month campaign to tame inflation. 

“With signs that the economy is shuffling off into a potential recession, the expectation is that [Fed policymakers] are likely to keep rates on hold,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

Traders awaited the latest US consumer price index report on Tuesday, which is expected to show that headline inflation slowed to 4.1 per cent year on year in May, according to economists surveyed by Reuters.

The reading would mark a significant improvement from the 4.9 per cent rate in April, after the 5 per cent figure in March, giving the Fed more room to pause.

“Any deviation from the forecast path is likely to cause a jolt of volatility on markets,” Streeter said.

US futures were up, with contracts tracking the benchmark S&P 500 rising 0.3 per cent and those tracking the Nasdaq 100 gaining 0.4 per cent ahead of the New York open.

Oil prices dropped after Chinese data last week showed that producer price deflation accelerated to its fastest clip since 2016 and exports performed worse than expected, signalling that demand was weak both inside and outside the country.

Brent crude, the international benchmark, fell 1.6 per cent to $73.61, while US marker West Texas Intermediate fell 1.7 per cent to $69.02.

The yield on the two-year US Treasury note, which is sensitive to rate expectations, rose 0.01 percentage points to 4.62 per cent. The yield on the 10-year note was flat at 3.75 per cent. Bond yields rise as prices fall.

Meanwhile, economists are still convinced that the European Central Bank will raise its deposit rate by another quarter percentage point when policymakers meet next Thursday.

Asian equities struggled for direction, with Hong Kong’s Hang Seng index down 0.2 per cent and Japan’s Topix up 0.7 per cent.