Report by Singular Bank
The main European indices closed the session with widespread gains, buoyed by an earnings season that continues to surprise on the upside. The Euro Stoxx 50 rose by 0.5 per cent and the Ibex 35, in line with the main European markets, rose by 1 per cent.
In the United States, at the close of European trading, performance was more subdued. The S&P 500 was virtually flat (up 0.1%), whilst the Nasdaq 100 edged down slightly due to weakness in the technology sector.
The main focus for the markets was the trend in corporate earnings. The results released so far continue to show better-than-expected performance in both revenue and profits, reinforcing investor confidence in the ability of European companies to maintain margin growth in an environment of still-high interest rates.
On the geopolitical front, the United States expanded its military operations on Iranian territory in the early hours of the morning with new strikes on facilities near Tabriz. Both Washington and Tehran ruled out any immediate progress in diplomatic negotiations, a scenario that kept pressure on the energy markets and once again raised concerns about future inflation trends.
Furthermore, the Trump administration continues to prepare for the introduction of new tariffs on goods from numerous economies once the temporary 10 per cent tariff regime expires. The measure increases uncertainty surrounding international trade and keeps investors’ attention focused on the potential impact on global growth during the second half of the year.
Sovereign debt saw a day of moderate selling, reflected in a slight rise in the yields demanded by investors. The stronger performance of equities, coupled with a further rise in oil prices, fuelled higher inflation expectations and partially reduced the relative attractiveness of sovereign debt during the session, although this trend eventually moderated.
Against this backdrop, the yield on the 10-year German Bund rose by 1 bp to 3.17 per cent, whilst the 10-year Spanish bond remained at 3.63 per cent and the 10-year US Treasury closed the session at 4.64 per cent, following a rise of 1 bp.
The price of Brent crude rebounded above $93 per barrel, driven by tensions in the Middle East.
Gold rose by 2.2% to $4,165 per ounce, regaining its role as a safe-haven asset.
The EUR/USD closed virtually unchanged at 1.141.
