(Bloomberg) -- European stocks kicked off the week with gains as Israel's military action in Gaza proceeded more cautiously, while investors look to the Federal Reserve for direction on interest rates.
The Stoxx 600 index was up 0.6% in a broad risk-on move, with almost all the sectors trading in positive territory. Oil fell as Middle East conflict remained contained as Israel's heightened push into the Gaza Strip had yet to evoke significant, military retaliation from Iran or its proxies.
Among single stocks, Siemens Energy AG jumped after the supervisory board chairman Joe Kaeser pushed back against suggestions the troubled turbine maker may need a taxpayer-funded bailout from the German government. Ascential PLC soared after it proposed a sale of Digital Commerce to Omnicom Group, and also WGSN to Apax Funds. HSBC Holdings Plc nearly unchanged after it announced a $3 billion share buyback.
Some of the region's earnings updates have been misfiring at a time when investors are already worried about elevated rates and geopolitics, which could drag equities down further. Last week, European stocks were on the verge of wiping all gains made this year.
Charles-Henry Monchau, CIO at Banque Syz said “the combination of elevated bond yields and downward earnings revision is negative for stocks. While third quarter earnings surprised overall, thanks to stronger growth, the market is now downgrading fourth quarter, pushing forward recession estimates.”
All eyes will be on central bank decisions this week, featuring decisions by the Federal Reserve, the Bank of Japan and the Bank of England.
Last week, ECB President Christine Lagarde confirmed that after an unprecedented campaign to raise borrowing costs, it plans to maintain the squeeze on the euro area for an extended period. She added that the economy is likely to face stagnation in successive quarters.
Contraction in Germany, whose own GDP report is due on Monday, is seen weighing on the region, while France and Italy, expected on Tuesday are expected to have eked out expansion.
SECTORS TO WATCH
- European oil stocks could be active with crude declining amid speculation that the war between Israel and Hamas may remain contained despite rhetoric from Iran.
For more on equity markets:
- This Earnings Season Marks a Reset of Expectations: Taking Stock
- M&A Watch Europe: Vodafone, Telecom Italia, Asos, Clariant, HSBC
- US Stock Futures Rise
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