European stocks close slightly higher amid hints of ECB interest rate cuts

Irish index of shares edges lower as a decline in banking shares and some key travel stocks weighs on market

European stocks closed slightly higher on Monday and government bond yields eased, amid hints of upcoming interest rate cuts by the European Central Bank (ECB), though trading activity was light in absence of US and UK participants as markets there were shut for public holidays.

Dublin

The Irish index of shares edged lower on Monday, as a decline in banking shares and some key travel stocks weighed on the market. By the close of the session. the Euronext Dublin was down just under half a per cent to 10,024.75.

The index had hit a high of 10,081.29 after 9am but it gave up the gains.

Bank shares were in the red, with AIB closing at €5.14, down 1.25 per cent over the day, and Bank of Ireland falling to €10.39, a 1.7 per cent decline. PTSB fell 0.33 per cent to €1.52. FBD holdings, meanwhile, was 4 per cent lower.

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The decline came as key policymakers at the ECB said the bank had room to cut interest rates as inflation slows but must take its time in easing policy, even if the direction of travel is already clear.

Other decliners during the day’s trading included Ryanair, which fell 0.14 per cent to €17.94, while Smurfit Kappa was 1.25 per cent lower.

There were few bright spots on the market, with food group Glanbia gaining 0.16 per cent, and insulation specialist Kingspan gaining 0.55 per cent to end the day at €91.45.

Europe

The pan-European Stoxx 600 index closed 0.3 per cent higher, in touching distance of an all-time high hit earlier this month.

Government bond yields across the continent eased, with the yield on the benchmark 10-year bund last at 2.547 per cent.

Most of the major Stoxx 600 sectors closed higher, with utilities leading the charge with a 1.1 per cent jump, while automobiles added about 1 per cent.

On the data front, a survey showed German business morale stagnated in May, falling short of a forecast for improvement. Germany’s benchmark stock index closed 0.4 per cent higher.

Among individual stocks, Alstom gained 5.6 per cent after the French train maker set terms of a planned €1 billion rights issue as part of broader actions to repair its finances.

Shares of salmon farmer P/F Bakkafrost shed 2.5 per cent slip after the ISA virus was confirmed in two pens at farming site A-19 Vágur.

The spotlight this week will be on a reading of May consumer prices for the euro zone due on Friday, while individual inflation readings from Germany, Spain and France will also be released throughout the week.

The ECB looks set to start easing interest rates in its upcoming meeting next week, with bets showing an over 90 per cent probability of a rate cut, according to LSEG data.

US inflation data, also due on Friday, could help traders assess the timing and numbers of possible rate cuts by the Federal Reserve this year.

London

Markets in the UK were closed for a public holiday.

New York

The US markets were closed for a public holiday.

Ciara O'Brien

Ciara O'Brien

Ciara O'Brien is an Irish Times business and technology journalist