LONDON: European shares rose on Monday after five straight weeks of declines as gains in mining stocks and positive earnings outweighed worries of a looming policy tightening cycle and geopolitical tensions.
The pan-European STOXX 600 rose 0.7% after sinking more than 5% this year, following sharp declines in tech stocks as broad inflationary pressures invited hawkish comments from major central banks.
Mining stocks were among the top performers for the day, rising 1.7% after positive comments from major commodity importer China pushed up metal prices.
“(The European Central Bank) could, after all, decide to lift rates in 2022. Prior remarks by (ECB President Christine) Lagarde and her colleagues highlighted no lift-offs this year, but now that door is open,” said Charalambos Pissouros, head of research at JFD Group.
Still, Lagarde said on Monday that inflation pressures could subside before becoming entrenched in expectations, which would negate the need for drastic monetary policy changed.
Her comments were in contrast to her stance last week, when she had opened the door to possible rate hikes this year.
On Monday, Germany’s two-year government bond yield rose to its highest in nearly seven years. But Italian bonds, which are regarded by money markets as the weakest link among European sovereigns, were sold off sharply.
The Italian stock benchmark widely lagged its peers on Monday, falling 1.0%.
Meanwhile, German industrial production dipped in December as supply chain bottlenecks and a drop in construction hampered Europe’s largest economy at the end of last year.
On Sunday, White House national security adviser Jake Sullivan warned that Russian President Vladimir Putin could order an attack on Ukraine within days or weeks as Washington and its European allies continued efforts to offer Putin a diplomatic way out of the crisis.
“Bearing in mind the rising geopolitical tensions in Ukraine, we cannot rule out volatile market swings,” Pissouros said.
Among individual stocks, Aurubis AG, Europe’s largest copper producer, firmed 3.2% after confirming an 85% rise in quarterly profit and reiterating higher full-year earnings estimates on solid metal prices and output.
French automotive group Faurecia advanced 0.9% after saying it would aim for sales of above 33 billion euros ($37.72 billion) in 2025, at an operating profit margin of more than 8.5%.
Shares in French care homes company Korian slid lower on Monday after a Paris lawyer said she was preparing a group lawsuit against the company, amid complaints of malpractice in the firm’s facilities.