European shares rose in the first trading session of 2023 on Monday, as eurozone manufacturing data suggested the worst of recession fears had passed after a year as central banks raised rates globally.
The pan-regional STOXX 600 rose 0.8%, supported by consumer favorite stocks. The automobile and parts sector gained 2.5% and luxury names such as LVMH and Kering gained 1.5% each.
“10-year bund yields above 2.50%, loose year-end trade and a potential drop in HICP inflation raise hopes for an upbeat start to the year,” Commerzbank research analysts said, referring to eurozone consumer prices. Inflation data this weekend.
The data was an early indication that euro zone manufacturing activity had eased as supply chains resumed recovery and inflationary pressures eased, leading to a resurgence of confidence among factory managers.
The STOXX 600 ended 2022 with heavy losses, driven by aggressive policies by central banks to control rising prices, an economic slowdown, the Russia-Ukraine conflict, inflationary pressures and growing concerns over Covid cases in China.
Despite more hawkish signals from the European Central Bank, rate-sensitive tech stocks, among the worst performers of the past year, rose 1.5%.
ECB President Christine Lagarde said euro zone wages are growing faster than previously thought and the central bank must stop adding to already high inflation.
Bond yields in Germany, Europe’s biggest economy, fell from their highest levels in more than a decade as investors looked for inflation data this week.
Germany’s finance minister expects inflation in Europe’s biggest economy to slow to 7% this year and continue to fall in 2024 and beyond, but expects higher energy prices to be the new normal.
The German DAX gained 1.0%, while other European exchanges also started the year on a positive note. The London and Dublin Stock Exchanges are closed for the New Year holidays.
The energy sector added 1.3%, tracking the company’s crude prices.
Croatia rang in the new year with two historic changes, as the EU’s youngest member joined both the EU’s borderless Schengen zone and the euro common currency.