Reported by Singular Bank
The main European indices closed the session with widespread gains, buoyed by the easing of tensions between the United States and Iran and the sharp fall in oil prices, factors which fuelled greater risk appetite. The DAX led the gains with a 1% rise, followed by the IBEX 35 (up 0.8%), whilst the Euro Stoxx 50 remained flat.
At the close of European trading, the session in the United States was taking a different turn. The S&P 500 was down 0.3 per cent and the Nasdaq 100 had fallen by 0.5 per cent, weighed down by sharp declines in the semiconductor sector following news of China’s progress in the manufacture of lithography equipment.
The main catalyst of the day was the easing of tensions in the Middle East. The US and Iran maintained a pause in hostilities for the third consecutive day, reducing the geopolitical risk premium and fuelling a strong rebound in risk assets.
Market attention also focused on China, after various reports suggested that a state-backed company had begun manufacturing advanced lithography equipment. The news increased pressure on the global semiconductor sector and contributed to the relative underperformance of technology companies during the session.
Brent crude fell by more than 7% and dropped back below $90 per barrel, following a reduction in the risk of supply disruptions and the resumption of exports from the Black Sea.
On monetary policy, ECB Governing Council member Peter Kazimir reiterated that he considers at least one further rate rise necessary to curb inflation. Meanwhile, the markets are bracing for Wednesday’s Federal Reserve meeting with mixed expectations following lower-than-expected US durable goods orders.
Fixed Income
Sovereign debt saw a day of buying, buoyed by the easing of tensions in the Middle East compared with last week.
Against this backdrop, the yield on the 10-year German Bund fell to 3.13% (down 4 basis points), the yield on the 10-year Spanish bond fell to 3.59% (down 4 basis points) and the yield on the 10-year US Treasury fell to 4.64% (down 3 basis points).
Commodities and currencies
Brent fell by 7.4% to $89.5 per barrel, reflecting the improvement in the geopolitical situation and the partial normalisation of supply. WTI also fell by 7%
Gold rose by 0.6% to around $4,080 per ounce.
In the foreign exchange market, the EUR/USD remained virtually stable at 1.138.
