European equity markets moved higher on Monday, approaching record levels as a sharp decline in crude oil prices boosted investor confidence despite lingering concerns over inflation and economic growth.
The pan-European STOXX 600 gained 0.4% in early trading, extending the positive momentum seen at the end of July. Strong second-quarter corporate earnings helped regional markets finish the month on a solid footing despite geopolitical tensions in the Middle East and ongoing debate over artificial intelligence valuations.
Germany’s DAX rose 0.9%, France’s CAC 40 added 0.8% and Italy’s FTSE MIB climbed 0.7%, while London’s FTSE 100 slipped 0.1%.
Oil Price Decline Supports European Equities
Investor sentiment improved after U.S. President Donald Trump announced that direct talks with Iranian officials were scheduled to begin on Monday. Trump also said he had cancelled a planned military strike in an effort to reach an agreement on reopening the Strait of Hormuz.
The president said the United States was engaging with Iran “in the form of negotiations… it starts tomorrow afternoon and we’ll see if it’s true.”
The prospect of renewed diplomacy triggered a decline of more than 4% in global crude oil prices, easing concerns over energy costs and providing support for European markets.
Lower oil prices particularly benefited industrial companies, airlines and consumer-focused businesses that have been under pressure from elevated input costs in recent months.
Investors Monitor Corporate and Economic Developments
Among individual stocks, AstraZeneca (LSE:AZN) fell around 7% after reports that the pharmaceutical company had held preliminary merger discussions with Bristol Myers Squibb. A potential combination would create one of the world’s largest pharmaceutical businesses.
Prysmian (BIT:PRY) gained around 1% after reports suggested the cable manufacturer was in advanced discussions to acquire Atkore.
Investors also assessed the latest economic indicators from across the eurozone. Final July Purchasing Managers’ Index (PMI) data pointed to stabilising business activity, while German retail sales figures provided further insight into consumer demand in Europe’s largest economy.
Inflation Outlook Remains in Focus
Despite Monday’s stronger market performance, investors continue to monitor inflation and central bank policy closely.
Recent U.S. inflation figures offered some encouragement after June’s Personal Consumption Expenditures (PCE) index came in below expectations, although core inflation remained above the Federal Reserve’s target.
In Europe, preliminary data showed annual inflation rising to 2.9% in July from 2.8% in June. Although slower food price growth and signs of easing labour market conditions provided some reassurance, persistent services inflation and resilient eurozone economic growth continue to support expectations that the European Central Bank may raise interest rates again later this year.
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