European Stocks Inch Down from Records

European stock indexes eased from their records on Monday as amid losses for consumer staple companies and pharmaceutical giants. The Euro STOXX 50 dropped 0.2% to 6,398 and the STOXX Europe 600 fell 0.4% to 650. Anheuser Busch InBev sank 4% and L'Oreal dropped over 1% to set the pace for consumer defensive stocks, while Inditex dropped more than 2% and both LVMH and Hermes pulled back 1% on a weak session for discretionary goods. Sovereign yields in the Eurozone rose further amid a curve steepening session as markets priced a hawkish ECB, despite recent signs that inflation may have topped in the currency bloc. On the other hand, banks closed higher with Deutsche Bank, ING, and Intesa Sanpaolo adding more than 1%. Also, Rheinmetall added 3.5% on a strong session for the defense sector.

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%.