European stocks hit 23-month highs, oil gains

London — European stock markets opened higher on Tuesday as traders bet on central banks cutting rates in 2024, oil prices gained after a naval clash in the Red Sea, and Chinese stocks were weighed down by mixed economic data.

Global stock markets rose overall in 2023, having gained particularly in the last two months of the year, while bond yields fell. This upbeat market sentiment continued on Tuesday as traders returned from end-of-year holidays.

The pan-European Stoxx 600 rose in early European trading, hitting its highest in nearly two years, up 0.5% on the day at 0829 GMT. Eurozone bank stocks rose to their highest since 2018. London’s FTSE 100 was up 0.2% and Germany’s DAX was up 0.8%.

The MSCI World Equity index was steady, down by less than 0.1% on the day.

“There is a feeling that (monetary) easing is coming and it seems like there is more to go in the rally in the short term,” said Nordea chief analyst Jan von Gerich. “I think there’s a risk to the downside for stocks but the momentum is strong right now.”

Data pointing to subdued business confidence in China for 2024 weighed on Chinese assets during Asian trading.

China’s manufacturing sector came under pressure from weak demand in 2023, with a property downturn, geopolitical factors and tight-fisted consumers all weighing on the post-pandemic recovery.

China’s onshore blue chip index was down 1.3% and Hong Kong’s Hang Seng index fell 1.5%.

The US dollar index was up around 0.1% at 101.44, holding relatively steady after it lost roughly 2% last year on bets that US rates would come down.

The US 10-year Treasury yield, which gained overall in 2023, rose to 3.9425%.

Market attention is now focused on economic data due later in the week, including the US non-farm payrolls report on Friday which could provide clues as to the US Federal Reserve’s next move. Minutes from the last Fed meeting in December are also expected to give insight into central bankers’ thinking regarding rate cuts.