European stocks remained steady while bonds faced pressure ahead of key US economic data, with Chinese tech stocks surging and gold prices rising due to a weaker dollar. The week’s focus is on US employment and manufacturing reports, which could influence Federal Reserve rate decisions. Political uncertainties in France and ongoing trade disputes also impact markets, alongside rising European bond yields and a strengthening euro.
Strategists predict that European equities will outperform U.S. stocks in the first half of 2024, citing improving economic surprise indices and more favorable inflation figures in Europe. They also highlight the relative value trade opportunity, as European stocks are trading at an all-time multiple discount compared to their U.S. counterparts. Despite the strong performance of U.S. tech giants, European stocks are expected to benefit from lower interest rates and potential earnings growth. However, near-term headwinds and negative market surprises are anticipated, particularly as central banks adjust rate cut expectations. Overall, strategists forecast an 8% upside for European equities in 2024.
European stock markets opened higher, with the Stoxx 600 index up 0.9%, led by gains in the technology sector. French game publisher Ubisoft Entertainment rose 6% after Microsoft announced a restructured deal for its takeover of Activision Blizzard, divesting several gaming rights to Ubisoft. Bond yields reached their highest levels since 2007, causing concerns about potential downsides for equities. Meanwhile, discussions are underway to avoid strike action in Australia that could disrupt global natural gas flows.
