European Equities Close Higher As Traders Bank On Imminent ECB Rate Cut: What's Driving Markets Monday?

Zinger Key Points
  • European equities ended broadly positive on Monday, while U.S. markets closed for Memorial Day.
  • ECB officials, including Chief Economist Philip Lane, affirmed that a June rate cut is a done deal.

European equities ended Monday broadly positive, while the U.S. market was closed for the Memorial Day holiday.

Traders maintained an overall positive risk sentiment on European assets, driven by near-total certainty that the European Central Bank (ECB) will deliver a rate cut at its June meeting.

Three key ECB members — chief economist Philip Lane, Finland Central Bank governor Olli Rehn and France Central Bank governor François Villeroy de Galhau — made reassuring statements indicating a rate cut is imminent.

  • “A June rate cut is appropriate if the inflation outlook holds,” Lane said.
  • “Inflation is converging to our 2% target in a sustained way, making it the right time in June to ease the monetary policy stance and start cutting rates,” Rehn said.
  • “Barring a surprise, a June rate cut is a done deal,” Villeroy said.

Traders now almost fully price in a June rate cut and expect a total of 65 basis points in cuts (more than two cuts but less than three) by the end of the year.

The euro, as tracked by the Invesco CurrencyShares Euro Currency Trust FXE, inched 0.1% higher to 1.0840.

Monday’s Performance In Major European Indices

CountryUS-Based ETFPrice1-day %chg
Spain – IBEX 35iShares MSCI Spain ETF EWP11,3350.79%
Italy – FTSE MIB iShares MSCI Italy ETF EWI34,7510.75%
France – CAC 40iShares MSCI France Index Fund EWQ8,1420.62%
EU – Euro Stoxx 50iShares Europe ETF IEV5,0650.58%
Germany – DAX Global X Dax Germany ETF DAX18,7930.53%

Monday’s Stock Movers In Europe

Monday’s top performers on the Euro Stoxx 50 index included:

  • RWE AG RWEOY +2.55%
  • Bayer AG BAYRY +2.32%
  • Volkswagen AG VWAGY +1.65%
  • Enel Società per Azioni ENLAY +1.6%
  • Iberdrola S.A. IBRDY +1.5%
  • Eni S.p.A. E +1.38%

European pharma giant Novo Nordisk A/S NVO and France luxury powerhouse LVMH-Moet Hennessy Louis Vuitton LVMUY closed 0.9% lower and 0.8% higher, respectively.

Dutch chipmaker firm ASML Holding N.V. ASML closed 0.2% higher, notching the third straight session of gains.

Among carmakers, Stellantis N.V. STLA rose 1.5%. Ferrari N.V. RACE closed up 0.7%, positively reacting to its victory in Sunday's Formula 1 Grand Prix in Monte Carlo.

Among major banks, UBS Group AG UBS outperformed, up 1%.

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Photo via Shutterstock.

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