Europe open: Stocks rebound from six-month low, Monte dei Paschi jumps

European stock markets rose slightly on Tuesday morning after a global sell-off the previous session saw the Stoxx 600 drop to a six-month low due to economic concerns in the US and the unwinding of yen carry trades.

The Stoxx 600 index was up 0.3% at 488.56 in mid-morning trade, with gains in London and Frankfurt offsetting weakness in Paris and Milan. The pan-European benchmark had dropped to 487.05 the previous session – its lowest close since 14 February.

Global stock markets fell sharply on Monday, with New York's Dow shedding more than 1,000 points (-2.6%) and Japan's Nikkei 225 plummeting 12.4% – its worst intraday decline since 1987.

However, futures on Wall Street were pointing to a solid rebound on Tuesday morning, while stocks in Tokyo were up more than 10%.

“There will be some relief this morning as the FTSE 100 and other European indices arrested the recent market rout and eked out some solid gains after stocks rebounded overnight in Asia,” said AJ Bell investment director Russ Mould.

“Fears about a sharp recession in the US, engendered by weak jobs data, remain and the unwinding of the yen carry trade may continue to play out, although whether the market moves are being exacerbated because many traders are on the beach is an open question."

Helping sentiment in Europe was the first rise in German factory orders this year, according to data from the Federal Statistical Office. Orders were up 3.9% over the month, Destatis reported, well ahead of the 0.8% increase expected by economists. This was the first monthly increase since December 2023.

The S&P Global/CIPS UK construction PMI also came in ahead of forecasts, rising from 52.2 to 55.3 in July, beating the 52.7 reading expected by the market.

However, retail sales in the eurozone fell more than expected in June, declining 0.3% after a 0.1% gain the previous month; economists had pencilled in a drop of just 0.1%.

The high riser on the Stoxx 600 early on was Italian bank Monte dei Paschi after its CEO said the state-owned lender was in talks to sell its French arm MP Banque. Shares were up 7%.

In London, InterContinental Hotels rallied 3% after saying underlying profits improved by 12% in the first half due to solid margin improvements and an acceleration in RevPAR growth in the second quarter.