European Markets Target Records as Tech Gains Lead the Rally

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Principal Points

• European stocks rise on Monday, boosted by a rally in technology companies
• US futures on Tuesday float in positive territory; Bitcoin breaks above $53,000 per coin

European shares advanced near record highs on Monday, powered by a strong rally in technology companies. A positive economic report from Germany helped fuel the upside move, suggesting Europe’s recovery remained on track.

The pan-European Stoxx 600 benchmark index rose 3.26 points, or 0.69%, to close Monday trading at 475.19. The broad stock gauge floats less than 1 point below its all-time record of 476.16 set in mid-August.

Trading on Monday was relatively quiet and defined by lower volumes than usual due to the three-day Labor Day weekend in the United States. American stock and bond markets were closed for Labor Day on Monday.

With the focus mostly on Europe yesterday, tech stocks led the rally as they gained 1.7% on the day. Recent uncertainty around the rise of Covid-19 infections has prompted market participants to seek a more virus-resistant form of investments such as technology stocks which proved the most robust sector during the highs of the pandemic.

Shares in ASML, a chip equipment maker, and Prosus, a Dutch-based tech investor, were among the biggest winners on Monday.

Inflation Threatens Eurozone Growth

The European tech gauge ended the day at 829.31, a peak for the year, and its highest level since December 2000.

Germany’s DAX added 150.92 points, or 0.96%, to close the day at 15,932.12. The CAC40 in Paris advanced 53.51 points, or 0.80%, to settle at 6,743.50. London’s FTSE100 gained 48.83 points, or 0.68%, to finish the session at 7,187.18.

In Germany, the July factory orders rose unexpectedly boosted by overseas demand. Factory orders increased 3.4% over the month, following a 4.6% advance in June. Economists expected a decline of 0.7%. Factory orders reports are a leading indicator of production. The numbers serve as guidance for change in the total value of new purchase orders placed with manufacturers.

European traders and investors are turning to the European Central Bank event this Thursday. ECB President Christine Lagarde will announce the interest rate decision for August.

While the interest rate is expected to remain near zero, the market will be looking to find out whether ECB policymakers have agreed to start reducing their bond purchases.

The ECB has been buying bonds at a pace of around €20bn since the start of the pandemic under its Pandemic Emergency Purchase Programme (PEPP). Some policymakers in the ECB have said they would like to pare back that amount as the European economy has now progressed substantially.

On the other hand, surging inflation threatens to hurt the robust growth in the eurozone. Preliminary data for euro area inflation in August showed prices rose 3.0%, up from 2.2% in July. Both inflation figures overshoot the ECB’s inflation target of 2%.

Stateside, US futures on Tuesday float in the green. Futures on the Dow Jones Industrial Average, the S&P500, and the Nasdaq Composite gravitate higher by roughly 0.1% each as US participants prepare to enter the market.

Bitcoin maintains its strong September performance today. The original cryptocurrency briefly topped $53,000 early on Tuesday and is currently trading near $52,500 per coin. So far in September, the price of bitcoin has not experienced a day in negative territory.