European Stock Markets Poised to Continue Upward Trend as Investor Sentiment Improves

European stock markets are expected to open higher on Wednesday, continuing a positive trend as investor sentiment improves. The optimistic outlook is underpinned by several key factors, including strong economic data from the eurozone and expectations of interest rate cuts by the European Central Bank.

In Germany, the benchmark DAX index was up 0.3% at 18,199 in early trading, after survey data from the ifo Institute showed business sentiment in the country improved in April. The business confidence index climbed to 89.4, beating economists' forecasts. Tech stocks advanced, with Infineon Technologies rising, while banks Commerzbank and Deutsche Bank also saw modest gains. However, biotech firm Evotec SE slumped 32% after reporting its full-year results and naming a new chief executive.

The pan-European STOXX 600 index edged up 0.1%, with the French CAC 40 up 0.2% and the UK FTSE 100 rising 0.5% to a new record high. Notable movers included ASM International, which jumped 10% after raising its Q2 revenue forecast, and Volvo Cars, which lost 8% as its Q1 revenue missed expectations. Other companies reporting results included Roche, Kering, and Reckitt Benckiser.

Why this matters: The positive sentiment in European markets reflects growing confidence in the region's economic recovery and the supportive stance of the European Central Bank. Stronger business activity and expectations of continued low interest rates are driving investor optimism, which could fuel further gains in stock prices.

Analysts see clear signs of economic health returning for the German economy, with the eurozone looking well set up to take full advantage of the dovish pivot from the European Central Bank. The improved investor sentiment is also attributed to factors such as the ongoing recovery in the global economy and the continued support from central banks.

As Carsten Brzeski, Global Head of Macro at ING, noted: "Today's Ifo index shows that the German economy is stabilizing and actually improving, especially thanks to the service sector. This is a welcome counterbalance to the still struggling manufacturing sector." The positive developments in Europe's largest economy bode well for the broader region, as investors look for signs of sustained growth and stability.

Key Takeaways

• European stocks expected to open higher on improved investor sentiment
• German business sentiment improved in April, boosting the DAX index
• STOXX 600 index edged up 0.1%, with FTSE 100 reaching a new record high
• Positive economic data and ECB's dovish stance driving investor optimism
• German economy stabilizing, with service sector leading the recovery