By Shreyashi Sanyal and Anisha Sircar
(Reuters) - European shares logged their best day in nearly two weeks on Monday after clocking falls in the previous week when a strong U.S. jobs report rekindled bets of another aggressive rate hike by the Federal Reserve.
The pan-European STOXX 600 index rose 0.8%, steadying after snapping two weeks of gains on Friday.
Nearly all sectors were up, with economically sensitive sectors including financial services and autos leading gains.
Focus shifts to a key inflation data from the world's biggest economy later in the week. Global stock markets were spooked on Friday after data showed a large increase in U.S. employment, denting hopes that the Fed might let up in its series of rate hikes aimed at taming surging inflation.
Economic surprises: https://fingfx.thomsonreuters.com/gfx/mkt/lgvdwylxjpo/Pasted%20image%201659946938721.png
After ending July with gains of over 7%, the STOXX 600 has struggled this month to extend the momentum on worries over dour economic data, rising geopolitical tensions and fears that higher interest rates could tip the economy into a recession.
Investor morale in the euro zone was essentially unchanged in August from July, with a rise too little to stave off recession fears, a survey showed.
"We see recession in Europe as likely even absent big rate hikes as broad economic stress from an energy crisis bite...The European Central Bank and markets underappreciate the risk of the energy crunch causing a recession, and the ECB will eventually accept this and rethink its rate path," wrote strategists at BlackRock (NYSE:BLK) in a note.
The world's biggest asset manager is underweight on European equities as the energy price shock stoked by the Ukraine war puts the region at risk of stagflation, they added.
Meanwhile, European oil and healthcare stocks missed out the broader rally, up 0.6% and flat, respectively.
Crude prices held near multi-month lows on demand worries, while healthcare stocks were pressured by the U.S. Senate on Sunday passing a bill intended to lower drug prices, among other things. [O/R]
Danish brewer Carlsberg (CSE:CARLa) rose 1.5% after lifting its profit growth outlook for 2022, saying it has been able to resume Ukraine operations and log a strong performance in Europe and Asia.
Siemens Energy fell 1.0%, blaming a 200 million euro ($204 million) charge related to winding down its Russian business for a wider net loss in 2022.
Italian stocks lagged their European peers after global ratings agency Moody's cut the country's outlook to "negative" from "stable" on Friday.