(Bloomberg) — European stocks struggled for direction Monday ahead of earnings season, as traders weigh the prospect of interest-rate cuts from the European Central Bank and signals that China could deliver more stimulus. 

The Stoxx Europe 600 Index gained 0.2% as of 2:36 p.m. in London, with technology stocks gaining the most and the consumer products and services sector showing the biggest decline. Travel and leisure stocks also underperformed, with Entain Plc down 13%, leading gambling stocks lower, after a report that UK Chancellor Rachel Reeves was considering as much as £3 billion of new taxes on the sector. France’s CAC 40 underperformed after Fitch revised France’s outlook to negative on Friday. 

Among other single stocks, investment manager Ashmore Group Plc shares rose after it reported an improvement in flows for the first quarter. Swiss industrial company Bossard Holding AG dropped after it reported a sales miss. 

While data so far point to a gentle cooling in the euro-area economy, rather than a rapid downturn, concerns are mounting about French finances and Germany’s lackluster economy. According to a Bloomberg survey Germany is suffering a mild recession, and output across the whole of 2024 will be flat — underscoring the malaise in Europe’s largest economy.

The downturn is likely to see the European Central Bank cutting interest rates this week. Investors are also trying to gauge the full impact of China’s recent stimulus blitz. Over the weekend, Beijing hinted at greater government borrowing to support the economy but fell short of giving a headline dollar figure.

While European stocks are still trading near record highs, the benchmark has been made little headway in recent weeks, moving around its 100-day average level by just 1.5% since mid-May, which is near a historical low for the past three decades. 

“There is the distinct possibility that seasonal weakness that is often seen in September but which was avoided this year, has been delayed and that October will turn out to be a more volatile period for markets,” said Daniel Murray, Zurich-based chief executive officer of EFG Asset Management.

Some of Europe’s largest companies, such as LVMH and ASML Holding NV, are set to report this week, starting on Tuesday. 

“Until we get greater clarity on the state of the macro cycle and its influence on the outlook for earnings, European equities may well remain range-bound,” added Murray.

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–With assistance from Jan-Patrick Barnert.

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