European stocks hit a two-week high on Monday, buoyed by hopes of easing energy prices, and bank stocks jumped to a nearly four-week high on bets for stronger interest rate hikes in Europe.
The pan-European Stoxx 600 index closed the trading session up 1.8%, after posting its first weekly gain in a month on Friday.
Investors are focused on efforts to pass multi-billion dollar financial support packages to ease liquidity pressures on utility companies and protect households from rising energy bills.
“We continue to see an extension of the positive sentiment that emerged last week as steps were taken in Europe to curb energy prices,” said Stuart Cole, chief macroeconomist at Equity Capital.
“This has greatly raised hopes that inflation will peak sooner than previously thought and that central banks … may not have to raise interest rates to the high levels originally feared,” he added.
Banking stocks, benefiting from the high interest rate environment, were among the best gains with the industry’s equity index up 3.4%, extending gains since Thursday when the European Central Bank hiked the rate benchmark interest rate of 75 basis points and promised further hikes.
Aggressive signals from the European Central Bank sent the banking index up about 10% this month, contributing to most of the Stoxx 600’s 3% gain so far in September.
Markets are now eagerly awaiting the upcoming US inflation data later this week and the decision by the US Federal Reserve’s Monetary Policy Committee later this month.
All major sectors in Europe rose, led by retail equities, which rose 4.5%.
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