European Stocks Poised for Muted Open

European stocks edged higher at the start of the week, with the STOXX 50 rising 0.2% and the STOXX 600 adding 0.1%, following last week's strong rally that lifted both benchmarks to fresh record highs. Investors shifted their focus to corporate developments and company-specific news ahead of the start of the earnings season. Travel and leisure stocks led the gains, with EasyJet surging nearly 10% after the airline agreed in principle to a £5.5 billion takeover bid from US private equity firm Castlelake. Luxury shares also advanced, with LVMH (+1.3%), L'Oréal (+1.2%), and Hermès (+0.9%) posting solid gains. Meanwhile, the technology sector lagged, weighed down by declines in ASML Holding (-1.5%) and Infineon Technologies (-3.2%).

European equity markets were set to open flat to slightly lower on Monday after reaching record highs last week, as investors turned their focus to the start of the earnings season. Traders also awaited a fresh batch of S&P Global PMI reports from across Europe for further insight into the health of the regional economy. In the US, attention will center on the minutes of the Federal Reserve’s June policy meeting for fresh clues on the interest rate outlook, as expectations for a near-term Fed rate hike have eased. Meanwhile, investors continued to assess the sustainability of the artificial intelligence trade amid growing concerns over whether heavy investment in the sector will ultimately translate into stronger profits. In premarket trading, Euro Stoxx 50 and Stoxx 600 futures were both down about 0.1%.

European stocks rose to new records on Friday amid an improving macroeconomic backdrop for equities and a bounce for companies with exposure to the speculative AI trade. The Euro STOXX 50 closed 0.9% higher at 6,417 and the STOXX Europe 600 rose 0.7% to 653. A session of thinner trading due to the holiday in the US put the spotlight on the tech sector, trimming its losses from a volatile week as investors reconsidered risks that chip producers and AI hyperscalers are overbought. ASML rose 3.7%, tracking Asian counterparts, and Infineon gained 1.2%. Meanwhile, companies with participation in data center operation gained with Siemens adding 2.5%and Schneider gaining 1.5%, while utilities Iberdrola and Enel rose 1.5%. While sovereign yields remained higher in the long end, lower yields for shorter maturities supported banks with BBVA and Deutsche Bank adding 1%. Gains consolidated as a soft jobs report in the US and inflation report in the Eurozone trimmed rate cut bets by central banks.