European stock markets hovered at one-month highs on Monday after data showed an unexpected rise in German exports and on firmer expectations of a new wave of stimulus by the European Central Bank to be introduced later this week.
The pan-European STOXX 600 Index opened higher but was down 0.1% as losses in the airlines and commodities sectors outweighed gains in both oil and auto stocks.
German exports rose 0.7% in July compared to an expected drop of 0.5%, indicating resilience in the face of impact from tariff disputes and uncertainties stemming from Brexit.
The latest data followed a streak of underwhelming information that fuelled concerns that Europe’s biggest economy could tip into recession in the July-September quarter.
“Germany is the powerhouse of Europe. If (its) economy has the potential for a recession, then that’s the real game-changer for ECB policy,” said Craig Erlam, senior market analyst at Oanda.
With the Euro Zone inflation well below target, market participants are betting that the ECB will cut its rate on bank overnight deposits for the first time since 2016 when it meets on Thursday.
An abundance of positive geopolitical news propelled stock markets to one-month highs last week, and signs of renegotiations regarding the U.S.-China trade talks further brightened investor sentiment.
Markets were lifted on Friday after China said it would slash the amount of cash that banks hold as reserves, while U.S. Federal Reserve Chairman Jerome Powell said that the Central Bank would continue to “act as appropriate” to sustain economic expansion.
Commodity-lined stocks were among the biggest drag on the market, weighed down by a decline in base metal and iron ore prices.
Germany’s trade-sensitive DAX Index was trading flat, while the Broadcaster ProSiebenSat 1 Media topped the STOXX 600 Index after brokerage UBS upgraded the stock from “neutral” to “buy.”
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