European shares rise after strong week, Bayer slumps

The pan-European STOXX 600 edged 0.1 per cent higher after climbing around 3 per cent last week

European shares edged up on Monday after a strong week driven by aggressive bets on interest rate cuts, while Bayer posted its worst day ever weighing on the healthcare sector and Germany's benchmark index.

The pan-European STOXX 600 edged 0.1 per cent higher after climbing around 3 per cent last week.

As investors began pricing in 100 bps rate cuts for 2024 with the first one seen as soon as April, ECB officials shunned market hopes, flagging still-high inflation and a somewhat resilient economy.

Markets are definitely jumping the gun. There is going to be a continuous repricing of expectations about that first rate cut- the most important one because of that shift in mentality from central banks, said Daniela Hathorn, senior market analyst at Capital.com.

Energy stocks led sectoral gains, jumping 1.3 per cent tracking firm crude prices as further supply cuts in OPEC+ production are expected in the coming weeks.

The healthcare sector eased 0.4 per cent after Bayer dropped 18.0 per cent briefly hitting its lowest level in 14 years after aborting a large late-stage trial testing a new anti-clotting drug.

Separate news that the firm had been ordered to pay $1.56 billion in the latest U.S. lawsuit over its commonly used Roundup weedkiller also hurt sentiment.

Germany's DAX slid 0.1 per cent.

In the meantime, data from the region showed producer prices dropped along expectations in October, continuing a downward trend after September's record decline.

Italian bank stocks advanced after Moody's upgraded the outlook for the country's sovereign debt in an unexpected boost for Prime Minister Giorgia Meloni's government.

The FTSE MIB edged 0.2 per cent higher.

The risk premium investors ask to hold Italian and Portuguese sovereign debt also dropped, reflecting some relief.

With Meloni coming into government, we have seen a stable economic landscape from Italy and the Moody's upgrade is a move towards stability in the credit market and will improve the positive sentiment, Hathorn said.