European markets traded slightly higher on Monday as investors digested comments from Federal Reserve Chair Janet Yellen who suggested a rate hike in the next few months is appropriate.
The pan-European STOXX 600 was 0.1 percent higher. Germany’s DAX index was around 0.4 percent higher, and hit a one-month high, while the French CAC 40 was 0.15 percent higher. London’s FTSE 100 is closed on Monday due to a public holiday and volumes across Europe are expected to be low. U.S. markets are also closed for Memorial Day.
The higher trade on Monday comes after a strong close to trading in the U.S. on Friday and as Asian shares were broadly higher. Yellen on Friday reiterated her call that a rate hike could be around the corner.
“It’s appropriate, and I’ve said this in the past, I think for the Fed to gradually and cautiously increase our overnight interest rate over time and probably in the coming months, such a move would be appropriate,” Yellen said in response to a question at Harvard’s Radcliffe Institute for Advanced Study.
Her comments were backed by St. Louis Federal Reserve President James Bullard on Monday. Speaking in Seoul, South Korea, the policymaker said that markets are “well-prepared” for a rate hike.
Analysts said that there is a larger consensus for a rate hike soon but it could lead to volatility in financial markets.
“I think the market is increasingly seeing they are going to hike pretty soon. But the key thing here is they going to hike and then wait half a year again…or are they going to hike…faster? I’m still in the camp that they are going to hike and then they are going to be moving very careful after that,” Thomas Harr, global head of FICC research at Danske Bank, told CNBC in a TV interview on Monday.
“But I think k the risk of financial market volatility…is clearly there because there is no doubt that Fed rate expectations were part of that equation driving higher financial market volatility.”
In individual stock news, Europe’s largest truckmakers are set to face cartel charges from the European Union within weeks, according to a report by the
Financial Times. DAF, Daimler, Iveco, Scania, MAN and Volvo/Renault were named in the original 2014 charge sheet. Shares of Volvo were trading lower while Daimler was in the black.
German airline Lufthansa was trading higher after it said it would suspend flights to Venezuela from next month due to economic problems in the country and issues converting local currency into dollars.
Elsewhere in the airline space, France’s Airbus said it will meet its target of over 650 total deliveries in 2016 after a slow start to the year, but shares were in the red.
And Postnl shares surged after news that Belgian mail operator Bpost discussed a takeover of the firm but the two failed to agree a deal. Both companies released statements on Sunday to this effect. Bpost shares were lower.
Meanwhile, Italian banking stocks rallied after newspaper Corriere della Sera reported on Saturday that pension funds and private pension groups may invest in Atlante – the country’s bank rescue fund. Banca Monte Dei Paschi Di Siena was around 3.2 percent higher, while Banco Popolare and Banca Popolare di Milano were in the black.
On the data front, German import prices in April fell 6.6 percent year-on-year, faster than the 6.2 percent forecast by analysts.
And in France, the economy grew by 0.6 percent in the first quarter, the national statistics office Insee said on Monday, faster than the initial 0.5 percent forecast. Meanwhile, Spanish consumer prices fell 1.1 percent year-on-year in May.
In the euro zone, the European Commission’s economic sentiment index rose to 104.7 in May, up from the 104.0 in April.