European stocks made a slight recovery, reversing earlier losses, as a series of trade announcements improved market sentiment. Signs that the European Central Bank is gearing up for interest rate cuts further buoyed the market. The Stoxx Europe 600 Index rose by 0.2%, with bank and consumer goods shares leading the gains. In contrast, real estate and insurance stocks lagged.
Germany's DAX index underperformed after data revealed a sharp drop in German factory orders in August, indicating challenges for Europe's largest economy. Among individual stocks, Danish wind energy company Orsted (ORSTED, Financial) saw a surge after Equinor ASA announced plans to acquire shares. Swiss company Richemont's stock briefly rose by 2.3% following its decision to sell online luxury retailer Yoox Net-A-Porter to Mytheresa.
Meanwhile, Heidelberg Materials' shares climbed 3.5% amid reports of potential acquisition talks for its Indian cement business by Adani. Commerzbank reached its highest point since 2011, with shares up 3%, as the bank accelerated its strategic plans, potentially preparing for a takeover offer from UniCredit.
These developments partially offset concerns over weak German data, ongoing Middle East tensions, and rising bond yields. After strong U.S. jobs data, the currency market anticipates a rate cut of less than 25 basis points. However, two European Central Bank Governing Council members suggested the bank might ease policy soon. Francois Villeroy de Galhau implied a rate cut is "very likely" at the upcoming meeting, while Martins Kazaks expressed comfort with continuing cuts at the current pace.
Attention now turns to the upcoming earnings season, which will offer insights into corporate health and the broader economy. According to Marija Veitmane, head of equity strategy at State Street Global Markets, lowered consensus expectations could lead to positive surprises. However, strategists at JPMorgan caution that macro risks, including regional politics, the upcoming U.S. presidential election, and slowing Eurozone growth, could continue to weigh on European stocks.
