European Stocks Edge Higher in Broad Rally Following US Peers
European stocks rose on Monday, following a broad rally in US markets. The Stoxx Europe 600 Index gained 0.3%, while the Euro Stoxx 50 Index rose 0.4%.
Gains Across Sectors
Gains were seen across sectors, with the technology sector leading the way. The Stoxx Europe 600 Technology Index rose 0.9%, while the Stoxx Europe 600 Health Care Index gained 0.7%. The Stoxx Europe 600 Financials Index rose 0.6%, while the Stoxx Europe 600 Industrials Index rose 0.5%.
Gains in Individual Stocks
Individual stocks also saw gains. German software company SAP SE rose 1.7%, while French drugmaker Sanofi SA rose 1.6%. British bank Barclays Plc rose 1.5%, while German carmaker Volkswagen AG rose 1.4%.
US Markets Lead the Way
The gains in European markets followed a broad rally in US markets on Friday. The Dow Jones Industrial Average rose 0.9%, while the S&P 500 Index rose 0.8%. The Nasdaq Composite Index rose 0.7%.
Rising Bond Yields
The rally in US markets came despite rising bond yields. The yield on the 10-year US Treasury note rose to 1.63%, its highest level since February 2020. The yield on the 30-year US Treasury note rose to 2.36%, its highest level since June 2019.
Rising Inflation
The rise in bond yields was driven by rising inflation expectations. The US Labor Department reported on Friday that the consumer price index rose 4.2% in May from a year earlier, its biggest annual increase since 2008.
Impact on European Markets
The rise in US bond yields and inflation expectations had a muted impact on European markets. Analysts said that investors were more focused on the economic recovery in Europe, which is expected to accelerate in the second half of the year.
Economic Recovery
The European economy is expected to grow by 4.2% this year, according to the European Commission. That would be the fastest rate of growth since 2007. The European Central Bank is also expected to keep interest rates low and continue its bond-buying program to support the recovery.
Brexit Negotiations
The UK and the European Union are also continuing their negotiations on a post-Brexit trade deal. The two sides have until the end of June to reach an agreement, or the UK will face tariffs on its exports to the EU.
Outlook
European stocks are expected to continue to rise in the coming weeks, as investors remain optimistic about the economic recovery. The UK and the EU are also expected to reach a post-Brexit trade deal, which would provide a further boost to European markets.