- UK PM race in focus
- China-exposed sectors fall
- Euro zone PMI falls to 47.1 in Oct
Oct 24 (Reuters) - European shares rose on Monday, driven by hopes that the Federal Reserve could slow its pace of interest rate hikes, while investors braced for a busy week of earnings and key interest rate decision from the European Central Bank.
The continent-wide STOXX 600 index rose 0.4%, with utilities, media and travel & leisure sectors leading the gains.
Wall Street's main indexes rallied on Friday after a report said the Fed will likely debate on a smaller interest rate hike in December.
"While it is encouraging that Fed officials have started to point to an end in sight for rate rises, such a pause will remain conditional on a fading inflation and a cooling labour market. This has yet to be seen in the data," said Mark Haefele chief investment officer at UBS Global Wealth Management.
"We believe the full effects of restrictive monetary policy for the economy and corporate profits are not yet well reflected in consensus forecasts – leading to potential disappointments ahead."
Keeping gains in check, Dutch technology investor Prosus tumbled 12.5%, tracking weakness in Hong Kong tech giants, after Chinese President Xi Jinping's newly unveiled leadership team heightened fears that economic growth will be sacrificed for ideology-driven policies. nL1N31O0L4]
Other China-exposed sectors such as oil & gas and miners fell 0.8% and 1.1%, respectively, while luxury stocks including Hermes and LVMH shed about 1% each.
Asia-focussed insurer Prudential Plc fell 6.5%, while banks HSBC and Standard Chartered dropped about 2%.
UK's blue-chip FTSE 100 underperformed as the pound rose following news that Boris Johnson had withdrawn from the contest to become Britain's next prime minister, likely paving way for Rishi Sunak to become the leader.
Meanwhile, euro zone business activity contracted at the fastest pace in nearly two years in October, an S&P Global survey showed as the cost-of-living crisis kept consumers cautious and sapped demand.
Focus this week will be on the European Central Bank's policy meeting where it is likely to hike interest rates by another jumbo 75 basis points as it tries to contain inflation running at five times its target, a Reuters poll found.
Among single stocks, Philips fell 3.8% after the Dutch medical equipment maker said it expected to scrap around 4,000 jobs and warned that supply chain problems would continue to weigh on sales in the last months of 2022.
Credit Suisse Group gained 1.1% after it settled a tax fraud and money laundering case in France with a 238 million euro ($234 million) payment to the state.
Reporting by Sruthi Shankar in Bengaluru; Editing by Shailesh Kuber