European Stocks Rise on Chinese Economy Signals Ahead of Key Events - 11 September 2023

European stocks reached a one-week high on Monday, driven by data suggesting a stabilization in the Chinese economy. Traders are preparing for a busy week, focusing on the crucial US inflation report and the European Central Bank (ECB) policy meeting.

Italian stocks (FTSEMIB) led the gains among European markets, climbing 0.8%, while the UK's FTSE 100 rose 0.4%.

In the sector-specific focus, the mining index (.SXPP) surged by 2.4% as metal prices increased on the expectation of improved demand from China, a major consumer.

Positive inflation data and additional stimulus measures from Beijing contributed to the perception that China, the world's second-largest economy, was stabilizing.

Investors are eagerly anticipating Wednesday's US inflation data, which will influence global interest rates. Additionally, market participants foresee a 60% chance that the ECB will maintain its interest rates on Thursday, according to LSEG data.

Deutsche Bank strategists noted, "Our economists have nervously maintained their 3.75% terminal deposit rate forecast for many months, and therefore, they believe the ECB will stay on hold." However, they added that even if there's no hike this week, it shouldn't be interpreted as a signal of confidence that this is the last hike. European inflation remains uncertain, and GDP growth has been stagnant since last autumn.

Investors will closely follow commentary from ECB officials throughout the week to solidify their expectations regarding the central bank's interest rate path.

Regarding individual stocks, Covestro (1COV) rose 3.2% after the German chemicals firm engaged in discussions with suitor Abu Dhabi National Oil Company (ADNOC) regarding a takeover approach.

Vistry Group (VTY) was the top gainer among individual stocks, surging by 13.3%, following its announcement of merging its affordable-housing business 'Partnerships' with its Housebuilding operations.

Conversely, Alfa Laval (ALFA) declined by 2.6% after Citi downgraded the Swedish engineering group's rating to "Neutral" from "Buy," citing an expected slowdown in order growth affecting earnings.

Lastly, ratings agency Fitch will review Germany's long-term credit rating on Friday. Currently, Germany holds an 'AAA' rating with a stable outlook, making it Europe's largest economy.

DAX received support and experienced a rebound at the 15,500 level. The current price range encompasses support at 15,500 and resistance at 16,400. In the short term, DAX went back toward the 15600 level after finding resistance at the 16000.

Resi Level 3	Resi Level 2	Resi Level 1	Suppo level 1	Suppo level 2	Suppo level 3
16600	16400	16200	15650	15400	15200