European Stocks Mixed; Focus on PMIs and Commerzbank

European stock markets exhibited mixed performance on Monday as the new week began with a cautious sentiment, with investors continuing to process last week’s significant interest rate cut by the Federal Reserve.

As of 03:10 ET (07:10 GMT), Germany’s DAX index was up by 0.1%, and the UK’s FTSE 100 also saw a gain of 0.1%. In contrast, France’s CAC 40 experienced a slight decline of 0.2%.

### Raised Optimism Following Fed Cut

The Federal Reserve’s recent decision to initiate its rate-cutting cycle with a sizable reduction of 50 basis points has sparked optimism among global stock investors. This lower rate environment is expected to enhance economic activity in the U.S., which is the world’s largest economy and a key growth driver.

This positive outlook was further bolstered on Monday by the People’s Bank of China’s (PBOC) announcement to cut its 14-day repo rate by 10 basis points, aiming to loosen local monetary conditions to promote economic growth. This decision followed market disappointment when the PBOC left its benchmark loan prime rate unchanged just days earlier.

In the wake of the Fed’s move, both the Dow Jones Industrial Average and the S&P 500 reached record highs, suggesting that European indices may also have room for upward movement.

### Upcoming Flash PMIs

A series of flash September Purchasing Managers’ Index (PMI) reports for the eurozone and the UK will be released soon, providing further insights into the state of economic activity in Europe.

Earlier this month, the European Central Bank reduced its key interest rates by 25 basis points following a similar move in June. Any further indication of economic struggles in the euro region could heighten expectations for additional policy easing in October, especially in light of the Fed’s recent actions.

Significantly, major economic data releases this week will include the Fed’s preferred inflation measure—core personal consumption expenditures—scheduled for Friday. Analysts anticipate a month-on-month rise of 0.2%, bringing the annual rate to 2.7%, while the headline index is expected to decrease to 2.3%.

### Commerzbank Shares Decline

Commerzbank’s stock fell after the German government announced it would maintain its 12% stake in the bank for the time being, likely delaying any potential merger discussions with Italy’s UniCredit.

On Friday, Germany’s Finance Agency indicated that it would not divest any further shares in Commerzbank for now, reaffirming the bank’s strategy of aiming for independence. UniCredit, Italy’s second-largest bank, had recently acquired a 9% stake in Commerzbank, raising the possibility of cross-border banking consolidation.

### Middle East Tensions Support Crude Prices

Crude oil prices rose on Monday, driven by concerns that escalating conflict in the Middle East might disrupt regional supply.

By 03:10 ET, Brent crude increased by 0.3% to $73.92 per barrel, while U.S. crude futures saw a 0.4% rise to $71.25 per barrel. Traders are applying a risk premium to oil prices amidst ongoing tensions, particularly as Israel continues its military operations in Gaza and Lebanon, raising fears of a broader regional conflict.

The ongoing violence and threats of war have heightened concerns that any escalation could affect supplies in this oil-rich area, tightening global markets. Moreover, crude prices have rebounded over the last two weeks from near three-year lows, exacerbated by supply disruptions following Hurricane Francine.