Europe's Central Banks May Be Moving Closer to an Easing Cycle

European stock markets closed higher on Monday, bucking the trend of geopolitical uncertainty. The FTSE MIB in Italy led the advance with a gain of 1.34%, while Germany's DAX rose 1.45% to lead the major markets.

The lone exception was the UK's FTSE 100, which slipped 0.10% as its continental peers outperformed it. European government bonds also rallied across the board, with 10-year yields falling in every major market as investors increased demand for sovereign debt.

Italy and the UK led the move, with the UK 10-year gilt yield dropping 10.1 basis points and Italy's 10-year BTP yield falling 8.8 basis points. The broad decline in yields suggests investors are becoming more confident that inflation pressures will continue to ease, reinforcing expectations of a potential easing cycle from Europe's central banks.

Meanwhile, US stocks built on the positive tone established overseas, with all major indices trading higher led by the NASDAQ index which rose 1.95%.