European stocks start 2023 with gains after sharp falls last

European stocks start 2023 with gains after sharp falls last year

European stocks started 2023 on a high as traders bought stocks at a discount after falling sharply in global markets over the past year.

The regional Stoxx 600 rose 1 percent on Monday after the index fell 12.9 percent in 2022 in its worst year since 2018. France’s Cac 40 rose 1.9 percent on Monday, Spain’s Ibex rose 1.7 percent, Italy’s FTSE Mib gained 1.9 percent and Germany’s Dax drifted 1.1 percent higher. Markets in London and New York were closed on bank holidays.

Global stock and bond markets lost more than $30 trillion in 2022 as central bank interest rates rose and the war in Ukraine caused heavy losses. The MSCI All World stock index lost 19.8 percent of its value, with many pandemic-era high-flyers such as electric carmaker Tesla plunging.

Monday’s gains in Europe were broad-based, with most sectors of the Stoxx 600 rising on the day. Economically sensitive sectors such as real estate, energy and retail led the way higher. Health care and consumer staples, both defensive sectors, lagged.

Despite the positive start to the year, many investors and analysts remain cautious about 2023 as policymakers are expected to continue their fight against inflation. Higher borrowing costs and higher energy prices have also increased the risk of recession in major economies. Meanwhile, widespread coronavirus outbreaks in China, which began lifting Covid-19 curbs late last year, have sparked new concerns about the world’s largest emerging market.

“The market year 2022 was extraordinary in many ways with war in Europe, rampant inflation, energy crisis and sharp interest rate hikes from the world’s central banks,” said Filip Carlsson, strategist at Swedish bank SEB. “Looking ahead to 2023, it’s difficult to be overly optimistic as most issues remain.”

FX markets were subdued on Monday. The pound fell 0.4 percent against the dollar to $1.205, while the euro slipped the same range to $1.066. The Japanese yen rose 0.3 percent at ¥130.7 at the open and slipped nearly 0.3 percent by the afternoon session.

This week, market watchers are awaiting the release of preliminary inflation numbers from several major European countries, as well as a US manufacturing survey. The weekly unemployment figures from the US should also give further clues to the Federal Reserve’s plans for rate hikes in the world’s largest economy.