European Bourses Rebound with ECB Rate Cut in Focus

European bourses experienced a rebound on Monday, recovering from the previous week’s steep declines. Investors focused on the anticipated interest rate cut from the European Central Bank (ECB) slated for Thursday. The pan-European STOXX 600 index closed higher, driven by gains in French stocks and the travel and leisure sector.

European bourses saw a recovery on Monday, rebounding from last week's significant losses as attention shifted towards a likely interest rate cut by the European Central Bank (ECB) on Thursday. The pan-European STOXX 600 index rose by 0.8%, after plunging 3.5% the previous week, marking its worst performance since March 2023, as investors moved towards safer assets amidst fears of a global growth slowdown.

Leading the gains were major regional bourses, which advanced between 0.7% and 1%, with French stocks at the forefront. Despite these gains, economic concerns linger in the eurozone, as data revealed a third consecutive monthly drop in investor morale for September, hitting the lowest level since January.

The spotlight now turns to the ECB's upcoming rate decision. Markets widely expect the central bank to cut rates by 25 basis points and will be keenly listening for any cues from ECB President Christine Lagarde regarding potential further cuts this year. According to analysts at Danske Bank, the cooling labor market and reduced economic activity since June should bolster confidence in the ongoing disinflationary process, particularly given the slowdown in wage growth.

Other focal points this week include various economic reports such as inflation figures from the U.S., Germany, Spain, and France, along with Britain's GDP figures. Markets will closely monitor U.S. inflation data for hints on whether the Federal Reserve, also meeting later this month, will opt to ease policy by either 25 or 50 basis points. The STOXX 600 sector indexes were largely in positive territory, except for a slight 0.2% dip in real estate, which paused after last week's 4% rise.

Travel and leisure sectors outperformed, climbing 2.1%, spurred by a 5.3% increase in Entain, as the British gambling group reported better-than-expected online revenue growth early in the second half of 2024. Conversely, Adidas AG dropped 3% after Barclays downgraded the stock from 'overweight' to 'equal weight'. Ubisoft Entertainment plunged 7%, coming in at the lowest point on the STOXX 600, following a 'neutral' rating downgrade by Cantor Fitzgerald. On a more positive note, Sofina soared nearly 12% after announcing a second share buyback program.

(With inputs from agencies.)