PARIS (Reuters) – Major European stocks rose in early trading on Monday, as cheap buying fueled a rebound in equities after last week’s pullback on the prospect of ever-higher interest rates.

In Paris, the CAC 40 gained 1.1% to 7,266.49 points around 09:35 GMT. In London, the FTSE 100 takes 0.79% and in Frankfurt, the Dax advances by 1.16%.

The EuroStoxx 50 index is up 1.33%, the FTSEurofirst 300 0.79% and the Stoxx 600 0.87%.

Last week, the main European indices posted their worst weekly performance since the beginning of the year after the announcement of a further acceleration in the PCE inflation index, which raised fears that the Federal Reserve would continue its monetary tightening more a long time.

Investors expect the Fed to raise rates by 25 basis points at its next meeting, but some analysts are considering the possibility of a hike of half a point if inflation remains high and growth strong.

“The recent series of economic data for the United States and the euro zone has dampened hopes for rapid disinflation (…) We have raised our forecast for the final federal funds rate to 5.75% (or 25 basis points more than the market consensus) and for the ECB at 3.75%. In both cases, we do not expect a rate cut before the first quarter of 2024,” said Paolo Zanghieri, senior economist at Generali Investments.

Among the biggest increases in the CAC, Michelin advances by 2.30%, market sources indicating a change in advice from Goldman Sachs from “neutral” to “buy”.

The second German bank Commerzbank gains 3.56% for its first session since its reintegration into the Dax index.

AB Foods, owner of Primark, takes 2.52% after raising its financial forecast for the 2022-23 financial year and the Dutch postal company PostNL falls 10.34%, Jefferies lamenting in a note an annual profit forecast of exploitation far below the consensus.

SES drops 9.80% after the publication of its annual results and forecasts.

(Laetitia Volga, editing by Kate Entringer)

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