London: European shares rose on Monday after grim economic data from across the globe spurred some investors to bet on a greater likelihood of central bank policy action to stimulate growth.
The EuroSTOXX 50 was up 0.7% at 2,082.62 by 1102 GMT, having slid on Friday when a dismal U.S. jobs report capped off poor Chinese and European manufacturing data.
The ECB’s long-term refinancing operation in December and February figured large in the minds of investors mulling possible central bank, with those moves having helped the EuroSTOXX 50 record its best first quarter since 2006.
“I think people are starting to think that if things get bad enough, the economic figures are bad enough and then markets go down enough, maybe we’ll once again get some sort of intervention from central banks,” Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets, said.
“(Investors are) not too negative, not too short, because when central banks get in full force then markets tend to rally.”
The ECB meets on Wednesday, and while markets only see an outside chance of a rate cut then, data on Monday showing an unexpected stagnation in euro zone factory inflation in April gave the central bank more space to consider cutting borrowing costs.
Investors will also be listening carefully for any change in tone at ECB president Mario Draghi’s news conference.
Banking stocks advanced on Monday, boosted by the hopes of fresh central bank stimulus
The auto sector fell after disappointing sales from the United States published late on Friday, combined with the weak U.S. jobs report, suggested the industry could face hurdles in its recovery.
Volkswagen, BMW and Daimler suffered respective falls of 3%, 2.2%, and 1.9%.
While automakers posted strong US May sales gains from a year ago, the sales rate still fell short of expectations as the broader economy softened and gave pause to consumers mulling big-ticket purchases.
Petra Kerssenbrock, technical strategist at Commerzbank, sees 2,000 as the next good support area for the EuroSTOXX 50, noting a “deterioration of the market breadth”, with a number of stocks, as well as the DAX index, having fallen through their 200-day moving averages on Friday, also exerting pressure on the EuroSTOXX 50.
“We will remain bearish for quite some time longer. What we need for technical improvement is either a trading bottom pattern or a clear sell-off, but at the moment it’s still wait and see,” she said.