European shares advanced on Monday, supported by energy sector, after a bruising selloff last week sparked by growing fears of a global recession as major central banks promised further interest rate hikes ahead.

The region-wide STOXX 600 index was up 0.5% at 0913 a.m. GMT.

Energy stocks jumped 2.6% to spearhead gains in the index, as oil prices were supported by the prospects of demand recovery in top consumer China, although surging COVID-19 cases in the country after it relaxed some of its stringent curbs remain a cause of concern.

Tech stocks and miners, among the worst hit sectors last week, added 0.5% and 1%, respectively.

The tech sector had touched an over one-month low in the previous session.

“There could be a little bit of attempts at bargain-hunting going on given some of the losses, but there is still unease about what 2023 will bring,” said Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown.

The STOXX 600 has lost 12.5% this year on fears of a recession after the European Central Bank (ECB), like other major central banks, embarked on its aggressive rate-hike campaign to stem a surge in prices partly driven by the Russia-Ukraine war.

Recent signs of easing inflationary pressures had offered hopes of central banks signalling an end to their monetary policy tightening, lifting equities off their October lows.

However, the previous week saw such expectations take a major setback, with the STOXX 600 logging its worst week since September after the European Central Bank and the Federal Reserve stuck to their hawkish monetary policy stance.

Data pointing to slowing economic activity in the euro zone and the United States has only added to the gloom, as hopes of a so-called ‘Santa-rally’ heading into the year end fade. “I will be surprised if a significant Santa rally does materialize.

We’ve got the never-ending COVID story still causing problems in China and these concerns continuing about the extent to which central banks will have to raise rates,“ said Streeter.

The ECB will hike interest rates further in the euro zone to combat high inflation, ECB’s Vice-President Luis de Guindos said on Monday.

European stocks open flat after slump

Among individual companies, Freenet AG rose 3.6% after Deutsche Bank raised its rating on the German-based telecom provider’s stock to “buy” from “hold.”

AstraZeneca slipped 0.3% after the drugmaker’s immunotherapy failed to meet the main goal in a study among patients with a type of lung cancer.