European stocks were little changed yesterday amid very thin trading as investors considered the implications of a possible increase in US interest rates after Federal Reserve chair Janet Yellen said a hike is likely in the coming months.
Financial markets in the US and UK were shut due to public holidays.
The Stoxx Europe 600 Index added 0.1 per cent to 350.14 at the close of trading, after briefly rising as much as 0.2 per cent, with automakers rising the most.
The number of shares changing hands on the gauge was about 74 per cent lower than the 30-day average.
Ms Yellen said late Friday that an improving American economy would probably warrant another increase in borrowing costs “in the coming months”, a view also recently expressed by several regional Fed chiefs. She was speaking after data showed US growth picked up more in the first quarter than was previously estimated. Traders have increased the odds of an interest-rate increase in June to 36 per cent and to 59 per cent for July
The Iseq index ended the session little changed at 6,502.27 points amid a dearth of corporate news, having lost as much as 1.6 per cent during the course of the session.
Aryzta gained 2 per cent to €37.80 as investors positioned themselves before a management update to the market today.
"Aryzta does represent value at these levels, however, management needs to deliver on expanding operating margins, growing North American and European volumes while focusing on paying down debt before a revaluation re-rating of the shares can be seen," said Stephen Hall, an analyst with Cantor Fitzgerald.
The company’s share price has rebounded by 12 per cent from a low point in March after the company issued a disappointing set of results for the first half of its financial year. The shares gained 0.3 per cent in Swiss trading on Monday.
Permanent TSB added 0.7 per cent to €2.15. The company launched a new current account product yesterday in a bid to win more customers. Bank of Ireland gained 1.1 per cent to 27.2 cents.
Applegreen lost 2.3 per cent to €4.30, with investors taking little comfort out of reports over the weekend that the company will add executive launches to some of its petrol stations in Ireland.
While European shares rose last week by most since February, capping their longest streak of weekly gains since March, traders said that investors may become more cautious in the coming weeks as the UK prepares to vote on continued EU membership.
The DAX ended up 0.5 per cent at 10,333.23 points and France’s CAC added 0.3 per cent.
“There is currently a bit of optimism in the market, but the sentiment in the last few weeks was very depressed and the fund flow was highly negative,” said Christian Zogg at LLB Asset Management. “There is some kind of a rebound, but it is really difficult to see how far it goes in the next weeks before the voting in the UK.”
Among stocks moving on corporate news, Belgian postal company Bpost fell 2.4 per ent after saying it failed to reach an agreement to buy PostNL of the Netherlands. in a surprise announcement following speculation of an imminent merger. PostNL gained 3.5 per cent.
Banco Popular Espanol added 0.6 per cent after Spanish newspaper Expansion reported the lender has orders exceeding €4 billion for its €2.5 billion capital increase.
Analysts and fund managers said the recent rally in European equities could fade if the impetus from a weak euro fades. A weaker euro makes European goods cheaper overseas and foreign goods more expensive.
"The return to US rate hike expectations have reopened the possibility of short-term outperformance for European stocks," said Didier Duret at ABN-AMRO Private Banking. (Additional reporting: Bloomberg, Reuters)