Germany Drives European Stocks Higher as Attention Shifts to ECB Policy Meeting

European shares saw a modest uptick on Monday, led by Germany’s DAX, following robust industrial production data from the region’s largest economy. However, cautious sentiment prevailed ahead of the European Central Bank’s policy decision later in the week.

The STOXX 600 index edged up 0.2% by 0845, with Germany’s DAX slightly outperforming the broader market with a 0.5% gain.

Strong data from Germany’s manufacturing sector revealed that industrial production exceeded expectations in February, supported notably by the construction industry.

Cyclical sectors such as basic resources, automobiles, and industrial goods and services saw gains ranging from 0.4% to 1.3%.

Germany’s 10-year government bond yield reached a two-and-a-half-week high ahead of the ECB’s monetary policy meeting on Thursday, amid global uncertainty regarding the timing of interest rate adjustments.

While market consensus suggests that the central bank will maintain interest rates unchanged, investors will closely watch for any indications of a potential 25 basis point rate cut in June.

The benchmark index faced its most challenging week in over two months on Friday, as U.S. policymakers tempered market expectations for imminent interest rate cuts. Optimism surrounding rate cuts had been a key driver of gains across most developed markets since late 2023.

In company news, Atos SE surged 21.6%, poised for its strongest performance since January, following reports that Paris-based Butler Industries joined a consortium to rescue the struggling French IT consulting firm.

On the downside, Believe slumped 9.7% after U.S.-based Warner Music Group announced it would not submit an offer to acquire the French digital music company.

Bayer shares dipped 0.8% after a U.S. judge reduced a $1.56 billion verdict against the drugmaker to $611 million for three individuals who claimed their cancer was caused by its Roundup weed killer, by cutting punitive damages.

Zalando climbed 4.9% to lead the STOXX index higher, following brokerage Citigroup’s upgrade of the German online fashion retailer from “neutral” to “buy”.