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European shares wavered on Monday after two consecutive weeks of gains, as investors awaited key corporate earnings reports, with stabilizing oil prices supporting the energy sector. The pan-European STOXX 600 index remained flat at 0845 GMT, fluctuating between minor gains and losses.
Last week, the STOXX 600 gained momentum following the European Central Bank’s (ECB) decision to cut interest rates, with Austria’s central bank governor indicating that inflation is now under control.
Election Uncertainty and Impact on European Markets
Rising odds of Donald Trump’s victory in the upcoming U.S. elections on November 5 have unsettled European markets. A potential Trump win is viewed as a challenge for the European economy, as reflected in the performance of assets tied to Trump’s campaign, including the U.S. dollar and cryptocurrencies like Bitcoin.
With Trump’s economic policies likely to focus on protectionism, European companies with significant U.S. exports will be closely monitored in the run-up to the election, according to strategist Claudio Cicione. Additionally, cyclical sectors could benefit from improvements in the U.S. economy after expected rate cuts.
Earnings Reports to Watch
This week kicks off earnings season for the financial sector, with major players such as Deutsche Bank, Lloyds, and Barclays set to release their reports. The tech sector will also be in focus, as German software giant SAP, which represents 15% of the DAX index, is scheduled to report its third-quarter earnings after the market closes.
Energy Sector Rises, Insurance Slips
Energy stocks led sectoral gains on Monday, rising by 1% as oil prices stabilized after a steep 7% drop last week. In contrast, insurance stocks saw losses, with Munich Re falling over 2%. Jefferies downgraded the reinsurer to a “hold” rating, citing limited upside potential.
Individual Stock Movers
In single-stock movements, JDE Peet’s, a major coffee and tea company, surged 17% after appointing a new CEO and confirming its 2024 financial outlook. French auto parts supplier Forvia jumped 9% following the announcement of new deals with Chinese automakers BYD and Xiaomi.
On the downside, Swiss testing and inspection company SGS fell 2.6% after RBC downgraded the stock to “underperform,” citing concerns about future growth.
With the upcoming U.S. election and earnings season adding volatility, European markets are facing a delicate balance as investors navigate the current economic landscape.
