Reported by Nicolás Lopez Medina
Following a clearly bearish opening, European stock markets recovered ground throughout the day, buoyed by a diminishing fear of an escalation of the conflict in the Middle East. Improved investor sentiment during the session allowed the market to recoup much of the losses recorded at the opening.
The technology sector led the intraday recovery after having been the main focus of selling in the early trading hours. The market continues to show heightened sensitivity to any news related to the geopolitical environment.
Corporate activity provided additional support to the market. In the financial sector, the strong rise in Monte dei Paschi di Siena stood out particularly after it emerged that several Italian competitors were interested in acquiring it.
The Italian MIBTEL index rose by 0.7%, led by the financial sector. The Ibex 35 fell by 0.66%. Meanwhile, the Euro Stoxx 50 rose by 0.2%.
US equities are trading with significant gains, led by technology and semiconductor stocks following the sell-off at the end of last week. Market movements seem to support the view that the recent correction was primarily driven by technical and positioning factors, rather than a deterioration in economic fundamentals. The performance of corporate earnings and the resilience of economic activity are bolstering investor sentiment.
At the close of the European session, the S&P 500 was up 0.7% and the Nasdaq Composite 1.6%, partially recouping Friday’s sharp decline.
The bond markets remain focused on Thursday’s ECB meeting, for which a 25-basis-point rise in official rates is priced in. In the United States, the strong employment data released on Friday has reinforced the scenario of higher rates for longer, reducing expectations of monetary easing.
The yield on the 10-year German bond has risen by 2 basis points to around 3.06%, whilst that of the 10-year US Treasury has risen by 3 basis points to 4.55%, supported by expectations of tighter monetary policy on both sides of the Atlantic.
The price of Brent crude has moderated the sharp rises seen in the early hours and is trading around $94.50, having touched $98 due to the resurgence of tensions between Israel and Iran. Trump’s statements reaffirming the continuation of talks have allowed much of the rally to be reversed.
The dollar remains close to two-month highs amid expectations of monetary tightening by the Fed. The EUR/USD fell as low as the 1.15 level, but recovered ground throughout the session and is trading around 1.154.
