Aug 10 - European equities opened a muted session on Monday with the pan-European STOXX 600 largely unchanged at 660.12 points as of 0715 GMT. The index entered the week following a 1.7% gain in the prior week and a record closing high on Friday, gains that market participants have linked to softer U.S. jobs data and robust corporate results on both sides of the Atlantic that supported expectations of lower U.S. borrowing costs.
Geopolitical developments surrounding passage through the Strait of Hormuz continued to weigh on sentiment. Iran said it was close to a final agreement with Oman to define new shipping lanes through the strategic waterway, but reiterated that the United States must satisfy additional conditions before traffic through the route can resume. Those comments left shipping flows constrained and contributed to higher crude prices.
Europe's energy stocks advanced 0.5% as Brent crude futures rose 0.6% to $83.98 a barrel, reflecting the slow pace of tanker transits through the strait where shipping levels remain at a trickle. The technology sector performed best among major groups, gaining 0.7%, while media names lagged, dropping 0.7%.
Market attention this week is squarely on macroeconomic releases that could influence central bank policy outlooks. Investors will be watching euro zone employment figures and U.S. consumer price data for additional clues on the path of interest rates. At the same time, the corporate reporting season is winding down.
Latest estimates from LSEG cited in market commentary show second-quarter earnings for the STOXX 600 are now expected to increase nearly 21%, a significant upward revision from projections of about 12.5% made in early May. Individual company moves included a 1.6% rise in shares of Caledonia Mining after the Zimbabwe-focused gold miner reported a 16% increase in second-quarter profit.
With earnings largely in the rearview and macro releases taking the stage, traders began the week cautious, balancing the twin influences of geopolitical risk to energy supply and the incoming economic data that could shape rate expectations.
Key points
- STOXX 600 little changed at 660.12 as of 0715 GMT, following a 1.7% rise and a record close last week.
- Brent crude rose to $83.98 a barrel as shipping through the Strait of Hormuz remained limited; Europe's energy sector gained 0.5%.
- Market focus this week on euro zone employment data and U.S. consumer price figures amid upward revisions to STOXX 600 second-quarter earnings.
Risks and uncertainties
- Unclear timeline for reopening the Strait of Hormuz - continued shipping constraints could keep oil prices elevated and affect energy sector performance.
- Upcoming macro data - euro zone employment and U.S. consumer price readings could shift interest rate expectations and market direction.
- Earnings momentum - while consensus estimates for STOXX 600 profits have been revised up, the earnings season is ending and future revisions remain a source of uncertainty.