European Stocks Steady Ahead of Central Bank Meetings, Brent Oil Rally Raises Inflation Worries

European stocks remained steady as investors exercised caution before this week’s central bank meetings, while concerns arose about potential inflation spikes due to Brent oil’s rally to $95 per barrel. The Stoxx 600 Index showed little change, with gains in autos and real estate stocks offset by drops in industrial goods and tech companies. Banco Santander SA shares slightly rose following a restructuring of its corporate structure, aiming to simplify operations. Conversely, Societe Generale SA stumbled as BNP Paribas Exane and HSBC downgraded the bank’s rating.

The recent surge in oil prices heightens concerns for central banks already grappling with inflationary pressures. The rally could put pressure on central banks just as they appear to be reaching the end of their tightening cycles. Mathieu Racheter, head of equity strategy at Bank Julius Baer, notes that the rise in oil prices has played a significant role in the ongoing equity selloff.

Furthermore, fears about the health of the Chinese economy have also impacted market gains. Despite these short-term corrections, Racheter believes that the secular bull market remains intact.

This week’s central bank meetings, starting with the US Federal Reserve on Wednesday, have heightened market nervousness. In addition, a report suggesting that European Central Bank policymakers are contemplating increasing the amount of reserves required from European lenders is unwelcome news for the banking sector.

Notably, European energy-related stocks could experience increased activity following Brent oil’s surge above $95 per barrel, marking its highest level since November.

– Bloomberg