© Reuters. The DAX chart of the German stock price index is pictured on the stock exchange in Frankfurt, Germany, July 21, 2023. REUTERS/Staff/File Photo
By Sruthi Shankar
(Reuters) – European equities touched a five-week high on Monday as upbeat earnings and hopes that the European Central Bank is nearing the end of its interest-rate-hike cycle offset losses in Spanish stocks after the country’s general election produced no clear winner.
Spain’s benchmark IBEX index fell 0.8%, after hitting a one-week low earlier, after results from Sunday’s vote denied an easy path for blocs left and right to form a government, pointing to a political impasse and increasing jitters among investors.
Madrid-listed utility shares, which reward a win for the far-right party, tumbled. Endesa and Iberdrola (OTC:) fell 3.1% and 0.5%, respectively.
The Spanish lenders’ index that includes Banco de Sabadell, Banco Santander (BME:) and Caixabank fell 1.6%.
“The market appears to have caught up, having hoped for a more definitive outcome. In the short term, uncertainty will weigh on Spanish assets as investors wait to see what kind of coalition emerges or whether new elections are needed,” said Chris Beauchamp, chief market analyst at IG.
However, the pan-European edge edged up 0.1% to hit a five-week high.
A survey showed the decline in eurozone business activity deepened than expected in July as demand in the bloc’s dominant service industries waned and factory output fell at the fastest pace since COVID-19 first hit.
The figures, however, raised hopes that the ECB would not have to go so far in raising interest rates to control inflation.
“That did give the ECB some protection but with eurozone CPI continuing to drop from highs they already have the backdrop for a more dovish tone this week,” added IG’s Beauchamp.
Markets had been pricing in a quarter percentage point rate hike to 3.75% by the ECB later this week, but what it will do after July is less certain.
Among other stocks, Bavarian Nordic plunged 21.7%, the Denmark-based company said it had ended its respiratory syncytial virus (RSV) vaccine program.
Dutch health technology company Philips fell 6.2% as it expressed concern over China’s push to become self-sufficient in health-related technologies.
Swiss private bank Julius Baer rose 7.8% after reporting an 18% rise in net profit for the first half of 2023.
Boosting the telecommunications sector, Vodafone Group (LON:) rallied 4.3% after reporting accelerated first-quarter revenue growth, driven by strong demand in the UK and improvements in Germany, Italy and Spain