Reported by Álvaro Romero Mateu
European stock markets closed with clear gains following weaker-than-expected US employment figures, which eased pressure on interest rate expectations. This was bolstered by the reform package announced in Germany, featuring tax cuts and measures to boost business confidence. The Euro Stoxx 50 rose by around 1.2 per cent, the IBEX 35 by 1.4 per cent and the German DAX by 2.2 per cent.
Oil continued to act as a tailwind for Europe, easing pressure on transport costs, industrial margins and inflation expectations. The combination of lower oil prices and signs of reform from Berlin favoured a rotation towards banks, industrials, consumer stocks and companies more closely linked to the economic cycle.
The first catalyst of the session was the US employment data. The economy created just 57,000 jobs in June, well below expectations, which led the market to ease its expectations of a tightening cycle by the Fed and supported risk-taking in equities.
In Europe, another key factor was the reform package announced by the German government, featuring tax cuts, labour market changes, pension reform and a reduction in red tape. Whilst this does not constitute a major immediate stimulus, it is a significant political signal aimed at reviving the eurozone’s largest economy and boosting business confidence.
In Spain, the IBEX 35 hit new highs, buoyed by banks, industrials and cyclical stocks. The fall in oil prices benefited companies sensitive to energy costs and transport, whilst the technology sector remained under closer scrutiny due to concerns over margins, valuations and returns on investment in AI.
The underlying narrative is that the market is being underpinned by three factors: reduced energy pressure, expectations of more favourable interest rates in the US, and signs of reform in Germany. This combination encouraged a rotation towards traditional sectors without completely abandoning companies linked to artificial intelligence infrastructure.
Fixed Income
The fixed income market saw a session of moderate adjustments. Weaker US employment figures reduced bets on further rate rises. In Europe, yields rebounded slightly.
The yield on the 10-year German Bund stood at around 2.90%, up 2 basis points. In Spain, the yield on the 10-year bond stood at 3.40%, with a rise of around 2 basis points.
In the US, the yield on the 10-year Treasury note hovered around 4.46% following the jobs data.
Commodities and currencies
Brent crude stood at around $70–71 per barrel.
Gold rebounded towards the $4,125 per ounce mark.
In the foreign exchange market, the EUR/USD pair advanced towards the 1.14 mark, with the euro regaining ground against a dollar under pressure from reduced expectations of US interest rate rises.
