European equity markets kicked off 2024 cautiously, experiencing a marginal slip on the first trading day, accompanied by a retreat in bonds. Meanwhile, value stocks showed resilience, with sectors like telecoms, banks, autos, and energy leading gains, while consumer products and technology stocks lagged. The Stoxx Europe 600 closed down 0.1% in London, reflecting the nuanced market dynamics.
The rise of value stocks was notable, driven by positive performance in telecoms, banks, autos, and energy sectors. Energy, defense, and shipping stocks also saw an uptick after Iran deployed a warship to the Red Sea in response to the US Navy’s actions against Houthi boats. Despite the initial volatility in crude prices, concerns about the escalating Red Sea conflict waned towards the end of the European trading session.

AP Moller-Maersk A/S experienced a boost after temporarily halting transit through the Red Sea following an attack on one of its ships by Houthi rebels. On the flip side, ASML Holding NV faced a decline after reports surfaced that it canceled shipments of some machines to China at the request of the US President Joe Biden’s administration.
Tensions in the Middle East have heightened, with Iran’s actions complicating the US goal of enhancing security in the Red Sea—a crucial waterway for global trade. Additionally, a private gauge indicating increased momentum in China’s factory activity in December contradicted official data, reflecting the fragile outlook for manufacturers.
Despite a robust 13% gain in European stocks in 2023, driven by optimism about potential central bank interest rate cuts, the Stoxx 600 reached overbought levels, as indicated by its 14-day relative-strength index. Eurozone inflation figures expected later in the week will offer insights into monetary policy.
Joachim Klement, a strategist at Liberum, noted that the focus for European equity markets will shift to the upcoming inflation data, likely confirming a rapid decline in inflation. While the current rally is driven by hopes for swift rate cuts, Klement remains cautious, expecting markets to consolidate before sustaining another upward movement in the coming weeks and months.