By Sruthi Shankar and Anisha Sircar
(Reuters) -European shares hovered near two-month highs on Monday as signs of a slowing Chinese economy prompted investors to turn to defensive sectors such as healthcare and consumer staples typically seen as immune to business cycles.
The pan-European STOXX 600 rose 0.3%. The benchmark index was trading close to levels needed to recoup all of its June losses when fears about aggressive U.S. interest rate hikes and recession dominated the sentiment.
Healthcare stocks <.SXDP> were among the biggest boost to European bourses on Monday.
AstraZeneca rose 2.3% after the drugmaker said its cancer drug, Enhertu, developed with Japan's Daiichi Sankyo delayed the progression of a form of advanced breast cancer in previously treated patients.
Food and beverage <.SX3P> rose about 1% to lead gains, while utilities added 0.8%.
Those gains helped counter losses in China-exposed automakers, oil and miners after the country's central bank cut key lending rates in a surprise move to revive demand as data showed the economy unexpectedly slowing in July.
"Volatility in Europe is baked in for the rest of the year, given the Ukraine war, China's zero-COVID policy, inflation, and whether central bank hikes manage to tame things to a point where investors feel confident," said Danni Hewson, financial analyst at AJ Bell.
Investors await euro zone flash GDP and HICP inflation numbers due this week, as well as retail sales data from the U.S. due on Wednesday.
"People are waiting to find out what inflation is doing to the consumer purse - we're likely to get real insight this week into how the consumer is faring and today is a deep breath before the storm," Hewson added.
Meanwhile, German wholesale prices fell by 0.4% in July compared with the previous month, the first decline since Oct. 2020, the Federal Statistical Office reported.
Euro zone government bond yields fell on concerns of a possible recession. [GVD/EUR]
European stock markets have rallied off their June lows, echoing an upbeat sentiment on Wall Street, as signs that U.S. inflation may have peaked encouraged investors to scale back bets of aggressive rate hikes by the Federal Reserve.
The STOXX has climbed over 10% since hitting a year low in June, but remains down 9.3% for the year.
Among other stocks, HelloFresh jumped 2.7% after the German meal-kit maker said it could still achieve its earlier 2022 outlook despite cutting the forecast last month.
Henkel added 0.5% as the consumer goods group raised its outlook for organic sales growth in fiscal 2022.
(Reporting by Sruthi Shankar, Johann M Cherian and Anisha Sircar in Bengaluru; Editing by Sriraj Kalluvila and Ken Ferris)