European shares hit a two-week high on Monday, buoyed by hopes of some easing in energy prices, and bank shares jumped to their highest in nearly four weeks on bets for more strong interest rate hikes in Europe.
The pan-European Stoxx 600 index ended the trading session up 1.8%, following posting its first weekly gain in a month on Friday.
Investors are focused on attempts to pass multi-billion-euro financial support packages to ease liquidity pressures on utility companies and protect households from soaring energy bills.
“We continue to see an extension of the positive sentiment that emerged last week when measures were taken in Europe to cap energy prices,” said Stuart Cole, chief macroeconomist at Equity Capital.
“This has very much raised hopes that inflation may peak sooner than previously thought, and that central banks … may not have to raise interest rates to the high levels that were originally feared,” he added.
Banking stocks, which benefit from the high interest rate environment, were among the top gainers with the sector’s stock index rising 3.4%, extending gains from Thursday when the European Central Bank raised its benchmark interest rate by 75 basis points and promised further increases.
The European Central Bank’s hawkish signals have sent the banking index up regarding 10% this month, contributing to most of the Stoxx 600’s 3% gain so far in September.
Markets are now looking forward to US inflation data due later this week, and the US Federal Reserve’s Monetary Policy Committee decision later this month.
All major sectors in Europe rose, led by retail stocks, which jumped 4.5%.
