European Stocks Rise as German Ifo Expected to Show Improvement

European stock markets saw a slight uptick on Monday, recovering from a previous week of losses. Investors are particularly focused on the German Ifo business climate index, hoping for improved sentiment in the Eurozone’s leading economy.

As of 03:40 ET, the German stock index increased by 0.6%, the UK’s index rose by 0.5%, and France’s index saw a rise of 0.7%. Last week was challenging for European equities, with the German market falling nearly 3%. This was driven by the central bank easing the pace of interest rate hikes while emphasizing that significant adjustments are still to come in response to ongoing inflationary pressures.

Despite the cautious outlook on economic growth, the week has begun positively, with investors optimistic about a potential improvement in the Ifo index for December. This would mark the third consecutive increase in sentiment. Recent data indicated that the decline in German economic activity has slowed for two months, suggesting that the anticipated recession in the region may be less severe than initially feared.

Attention will also be on comments from ECB Vice-President Luis de Guindos in Madrid later on Monday, as investors seek insights into central bank policymakers’ perspectives.

In corporate developments, Germany is preparing to assume risks associated with €216 billion of derivatives accumulated by energy company Uniper, which has been significantly impacted by the energy crisis in the region. This move comes as EU energy ministers convene in Brussels to negotiate a potential cap on gas prices.

On the commodities front, crude oil prices experienced an increase on Monday, driven by the Biden administration’s decision to start replenishing its strategic reserves and anticipated demand growth from China in the new year. The U.S. government recently announced plans to purchase 3 million barrels of oil as it seeks to rebuild its reserves, which have been depleted to their lowest level in nearly four decades amid efforts to combat rising fuel prices.

Additionally, China’s recent easing of its stringent ‘COVID-zero’ policy is raising hopes for an expansion in economic activity in 2023, despite a surge in COVID cases following the reopening.

By 03:45 ET, oil futures were up 0.3% at $74.67 a barrel, while another prominent contract rose by 0.4% to $79.34, though both were still trading close to one-year lows due to recession fears. Meanwhile, gold rose by 0.3% to $1,806.25 per ounce, and another precious metal increased by 0.5% to 1.0631.