European stocks decline; Central Banks and Inflation in Focus by Investing.com

Investing.com – European stock markets fell on Monday, starting the new week on a downbeat note as investors worried about the state of the global economy and potential policy responses.

At 03:05 ET (08:05 GMT), Germany’s stock index was down 0.3%, France’s was down 0.3%, and the UK’s was down 0.3%.

Central banks in focus

European stocks closed lower on Friday after stronger-than-expected US data added to concerns that the Federal Reserve will proceed cautiously when it comes to further interest rate cuts.

This negative sentiment continued on Monday, as investors began to worry that the next move by the Fed might actually be to raise interest rates, especially if President-elect Donald Trump continues with his proposed policies of sweeping trade tariffs and tax cuts.

The ECB, by contrast, can ease policy further this year but must find a compromise that does not lead to recession or cause undue delay in curbing inflation, Philip Lane, chief economist at the European Central Bank, told an Austrian newspaper.

The European Central Bank cut interest rates four times last year, and markets are seeing four more moves this year.

“If interest rates fall too quickly, it will be difficult to control services inflation,” Lin was quoted as saying by Der Standard on Monday.

“But we also don’t want interest rates to remain too high for too long, because that would weaken inflation momentum in such a way that the inflation deceleration process does not stop at 2% but inflation may fall meaningfully below target,” Lin added.

Inflation data at hand

There is little economic data to digest on Monday, but much of the focus will be on US data on Wednesday after the Fed’s December meeting, released last week, showed that policymakers remain concerned about inflationary pressures.

There is also inflation data in Europe to consider, with the UK also scheduled for release on Wednesday. This will be carefully considered after last week’s sell-off in British government bonds, known as government bonds, due to concerns about the country’s financial health.

GSK is on acquisition path

In corporate news, GSK (LON:) stock fell 0.7% after the British drugmaker said it would pay up to $1.15 billion to acquire Boston-based biopharmaceutical company IDRx, which is developing a treatment for a rare type of tumor.

Porsche (ETR:) The stock rose 1.5% even after the German sports car manufacturer reported a 28% decline in 2024 China sales on Monday.

Across the pond, JP Morgan (NYSE:), Wells Fargo (New York Stock Exchange:), Citigroup (NYSE:) and Goldman Sachs (NYSE:) will begin fourth-quarter earnings on Wednesday, while Bank of America (NYSE:) and Bank of America (NYSE:) will begin fourth-quarter earnings on Wednesday. Morgan Stanley (NYSE:) reports results on Thursday.

Oil prices rise due to Russian sanctions

Oil prices rose strongly on Monday, extending last week’s gains following the announcement of additional US sanctions on Russian producers and ships, which could act as a significant logistical headwind to crude oil flows.

By 03:05 EST, US crude futures (WTI) were up 1.5% at $76.90 per barrel, while the contract was up 1.6% at $81.06 per barrel.

Both contracts have risen more than 6% since the middle of last week, when broader sanctions on Russian oil were first discussed, before being confirmed on Friday.

The new sanctions included Gazprom (MCX:) Neft and Surgutneftegas, as well as nearly 200 ships that shipped Russian oil, prompting China and India, the world’s largest and third-largest oil importers respectively, to source more crude oil from elsewhere. Which boosted prices and shipping costs.