European stocks gained on the first day of trading in 2024, with energy shares leading the advance as crude oil prices rose amid increased tensions over the Red Sea.
The Stoxx Europe 600 was 0.4% higher by 8:20 a.m. in London. Energy stocks climbed more than 1%, buoyed by gains in crude after Iran sent a warship to the Red Sea in response to the US Navy’s sinking of three Houthi boats over the weekend. The autos and mining sectors were also stronger.
In individual energy stock moves, TotalEnergies SE rose more than 2%, while Shell Plc climbed 1.9%.
Elsewhere, AP Moller-Maersk A/S rose after halting transit through the Red Sea following an attack on one of its ships by Houthi rebels.
ASML Holding NV fell 1.4% after Bloomberg reported it canceled shipments of some of its machines to China at the request of US President Joe Biden’s administration.
Geopolitical tensions in the Middle East have escalated, with the move by Iran complicating Washington’s goal of securing the Red Sea, a waterway that’s vital to global trade.
Elsewhere, a private gauge of China’s factory activity gained momentum in December, contrasting with official data that suggested the outlook manufacturers remains fragile in the nation where European firms are largely exposed.
European stocks gained 13% in 2023 as optimism that central banks will soon pivot to interest rate cuts, protecting regional economies from major contractions.
The rally sent the Stoxx 600 to overbought levels, as indicated by its 14-day relative-strength index. Eurozone inflation figures due later this week will provide clues about monetary policy.
“European equity markets will likely start to focus on the inflation data later in the week that should confirm the rapid decline in inflation. This may support stocks this week as the rally is mostly driven by hopes for rapid rate cuts,” said Joachim Klement, a strategist at Liberum.
“However, we remain cautious for the next couple of weeks and months as markets are heavily overbought and need to consolidate before they can sustain another leg up.”