Europe close: Stocks advance despite geopolitical tensions with US data ahead

European stocks were higher on Monday with little corporate news to drive sentiment and ahead of US inflation data on Tuesday that was expected to signal the future path of interest rates globally.

That was despite heightened geopolitical concerns as it emerged the US air force had shot down an airborne object near the Canadian border, the fourth downed in under a week.

“As if worrying about Ukraine and Taiwan wasn’t enough, now markets have the balloon shootdown contest between the US and China to keep them on their toes," said IG chief market analyst Chris Beauchamp.

"It is easy to laugh at the situation, but it shows how the relationship between the two has deteriorated over the past decade, and harbours ill for a global economy still struggling to respond to the post-Covid world.”

The pan-European Stoxx 600 index gained 0.90% to 462.03, while France's Cac-40 advanced 1.11% to 7,208.59 and the Spanish Ibex 35 was up by 1.02% to 9,210.30.

Investors were also expectant ahead of US retail sales figures due out on Wednesday, while the inflation numbers would be analysed to see if inflation was continuing to slow. Analysts were forecasting headline and core consumer prices to rise 0.4% for the month, with sales rebounding by 1.6%.

“Mixed messages are resulting in mixed movements as investors ponder the continued resilience of the US economy,” said Interactive Investor head of markets Richard Hunter.

“A renewed spike in Treasury yields implied higher interest rates to come, taking some of the froth from the high growth companies which have seen renewed interest of late. Despite its poorest showing last week since December, the Nasdaq nonetheless remains ahead by 12% in the year to date, in an effort to wipe out the hefty losses of 2022.”

“Another important indicator later in the week revolves around the vital US consumer, as retail sales numbers are released. These are expected to have rebounded slightly and in a separate report US consumer sentiment improved further in February, despite the backdrop of inflationary pressure. Taken together, the inflation and retail sales prints are likely to dictate sentiment in the immediate short term.”

In equity news, Castellum shares fell 6% as the Swedish property company posted fourth-quarter results revealing net income for the year of 1.75bn Swedish krona down from 11.8bn in 2021.

The company cited inflation, rising interest rates, a cautious bond market and global economic slowdown throughout the year. It also said it planned to raise around SEK 10bn via a rights issue to “strengthen its financial position”.

UK housebuilders slid after a slew of rating downgrades by Deutsche Bank, with Persimmon, Taylor Wimpey, Barratt Developments, Crest Nicholson and Redrow all down.