European shares moved higher on Monday, approaching record territory as a sharp decline in global oil prices improved investor sentiment.
Lower energy costs helped offset concerns about inflation, interest rates and the wider economic outlook.
STOXX 600 Moves Toward Record High
The pan-European STOXX 600 index rose 0.4% in early trading.
The advance followed a resilient July, when strong second-quarter corporate earnings helped European markets withstand renewed Middle East tensions and concerns about elevated artificial intelligence valuations.
Germany’s DAX gained 0.9%, while France’s CAC 40 climbed 0.8%. Italy’s FTSE MIB rose 0.7%, although London’s FTSE 100 slipped 0.1%.
AstraZeneca Falls on Merger Report
AstraZeneca shares dropped around 7% after Reuters reported that the pharmaceutical company was holding preliminary merger discussions with Bristol Myers Squibb.
A potential agreement could create the world’s largest pharmaceutical company, with an estimated valuation of almost $400 billion.
The report placed significant pressure on AstraZeneca, making it one of the weakest performers in European trading.
Oil Prices Tumble After Trump Announces Iran Talks
Energy market volatility eased after U.S. President Donald Trump said direct negotiations with Iran would begin on Monday.
Trump also said he had cancelled a planned military strike while efforts continued to secure an agreement to reopen the Strait of Hormuz.
The announcement raised hopes of a diplomatic breakthrough and sent global crude oil prices down by more than 4%.
Lower Energy Costs Support European Stocks
The decline in crude prices provided immediate relief for European companies that depend heavily on imported energy.
Industrial, travel and consumer-focused businesses benefited from expectations of lower fuel and production costs.
These sectors had faced growing pressure as geopolitical tensions pushed energy prices higher during the previous month.
Eurozone PMI Data Shows Signs of Stability
Investors also assessed new economic data from across Europe.
Final Eurozone Purchasing Managers’ Index readings for July pointed to stabilising business activity.
Markets also monitored German retail sales figures for evidence about consumer demand in Europe’s largest economy.
Inflation Concerns Remain
Despite the positive market performance, investors continued to face uncertainty over inflation and monetary policy.
In the United States, June’s Personal Consumption Expenditures price index came in below expectations. However, core inflation remained above the Federal Reserve’s 2% target.
This left investors uncertain about whether U.S. interest rates would remain restrictive for longer.
Eurozone Inflation Rises
Preliminary data showed that headline inflation in the Eurozone increased to 2.9% in July from 2.8% in June.
Higher energy prices linked to Middle East tensions were a major contributor to the increase.
Slower food inflation and signs of weakness in the labour market offered some relief. However, services inflation remained elevated.
Stronger-than-expected Eurozone economic growth during the second quarter also supported expectations that the European Central Bank could raise interest rates again later in the year.
Corporate Developments Drive Individual Stocks
Prysmian shares gained around 1% following a Bloomberg News report that the cable manufacturer was in advanced discussions to acquire Atkore.
Meanwhile, continued corporate earnings releases helped support the broader market.
The STOXX 600 moved close to Friday’s all-time high, suggesting that investor appetite for European equities remained resilient despite ongoing economic risks.
