European equity markets traded slightly lower on Monday as investors adopted a cautious approach ahead of a busy week featuring major U.S. technology earnings, the European Central Bank’s latest policy meeting and several key political developments in the UK.
The pan-European STOXX 600 index slipped 0.2% in early trading, extending the subdued mood that followed last week’s sharp sell-off in global technology stocks as investors reassessed artificial intelligence-related valuations.
London’s FTSE 100 fell 0.4%, while Germany’s DAX declined 0.2%. Spain’s IBEX 35 also lost 0.4% during the morning session.
Market sentiment remained under pressure as the conflict involving the United States and Iran continued, raising concerns about energy supplies and the broader economic outlook.
Brent crude climbed a further 2.2% on Monday, adding to recent gains and increasing concerns that sustained higher energy prices could reignite inflationary pressures across the eurozone.
The rise in oil prices has added another layer of uncertainty ahead of Thursday’s ECB policy meeting. While markets broadly expect policymakers to leave the benchmark interest rate unchanged at 2.25% following June’s rate increase, investors will be watching closely for any signals on the future direction of monetary policy.
Many analysts believe the recent rebound in oil and gas prices could encourage ECB President Christine Lagarde to maintain a cautious tone, leaving the possibility of further interest rate increases if inflation risks persist.
US technology earnings take centre stage
Although European stock markets have a smaller technology sector than their U.S. counterparts, many listed companies remain closely linked to spending by America’s largest technology groups.
Investors are preparing for quarterly earnings from Alphabet (NASDAQ:GOOG), Tesla (NASDAQ:TSLA) and Intel (NASDAQ:INTC), with their outlooks expected to provide important insight into demand for artificial intelligence infrastructure, semiconductors and enterprise technology spending.
The results are also likely to influence sentiment towards European suppliers operating across the semiconductor, industrial technology and engineering sectors.
Energy stocks outperform while airlines retreat
Higher crude oil prices supported gains across Europe’s energy sector, with Shell (LSE:SHEL), BP (LSE:BP.) and TotalEnergies (LSE:TTE) each rising by more than 1%.
Airline shares moved in the opposite direction as investors assessed the impact of higher fuel costs. Ryanair (LSE:0A2U) and Lufthansa (TG:LHA) both declined by more than 2%.
Among individual company movers, Segro (LSE:SGRO) fell around 1.5% after rejecting an improved takeover proposal from Prologis.
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