European stocks inch higher despite weak China trade data; Fed hike in focus

European stocks edged up on Monday but investors remain cautious after weak Chinese trade data and consider if the latest U.S. jobs numbers could trigger an interest rate hike by the Federal Reserve this year.

The pan-European STOXX 600 was up 0.33 percent.

Asian markets were broadly higher despite China’s July exports falling 4.4 percent year-on year-on and imports declining 12.5 percent.

Sentiment was likely underpinned by a strong U.S. report on Friday which showed the world’s largest economy added 255,000 jobs, beating expectations and raising the chances that the Fed could raise interest rates this year.

“Certainly the odds have gone up that we could get a move, which suggests that this month’s Jackson Hole Symposium on August 26 is likely to be a key bellwether for the Fed’s appetite for a move higher, or whether the lack of inflation could stay their hand,” Michael Hewson, chief market analyst at CMC Markets, wrote in a note on Monday.

Banks higher

The banking sector helped pull European stocks higher. Barclays shares rallied after Exane BNP Paribas sharply raised its price target for the stock along with HSBC which was also in the black.

Italy’s lenders were once again in focus as the country figures out how to deal with the large portfolio of bad loans held by the banks. Mediobanca shares were higher after Kepler Cheuvreux raised its price target for the stock. Vincent Bollore is looking to raise his stake in Mediobanca to 22-23 percent to indirectly control insurer Generali, according to La Stampa. Generali shares were also higher.

Meanwhile, chief executive of Banca Monte dei Paschi di Siena Fabrizio Viola said in an interview to Il Messaggero on Sunday that the rescue plan for the bank is the “right solution”. The plan involves selling its bad loans to a special-purpose vehicle which is backed by private investors as well as the state-backed Atlante fund. Shares in BMPS were trading higher.

Miners rally

Basic resource stocks rallied despite weak Chinese trade data. But drilling into the numbers showed Chinese iron ore imports rose 8.3 percent month-on-month in July to hit its second-highest on record. This helped iron ore mining giants Rio Tinto and BHP Billiton trade higher.

Steel exports in July however fell but exports still remain high, which supported Arcelormittal’s share price on Monday.

But precious metal miner Fresnillo was mildly lower as the gold price came off slightly.

Other stocks to watch

Among the other big movers of the day were Dutch mail and parcel delivery firm Postnl which rallied over 10 percent after it confirmed its outlook for 2016 and said it expects to resume its dividend payments in 2017.

German retailer Hugo Boss was near the bottom of the STOXX 600 after SocGen cut its price target for the stock, and Credit Suisse and a handful of other brokers cut their price target for drugs giant Novo Nordisk, sending shares in the firm into negative territory.

Source: CNBC