Singular Bank reports
The main European indices closed with losses of over 1 per cent, on a day marked by a clear shift towards risk aversion. The sharp rise in oil prices and tighter expectations regarding central banks weighed on equities, causing the Euro Stoxx 50 to fall by 1.7 per cent and the Ibex 35 by 1.6 per cent.
As European markets closed, selling pressure intensified in the US following a disappointing reaction to the results of several technology companies. The Nasdaq Composite led the declines with a fall of 2.4 per cent, followed by the S&P 500 at 1.3 per cent, reflecting the deterioration in investor sentiment towards the technology sector and companies linked to artificial intelligence.
The main catalyst of the day was the sharp rise in oil prices. Brent crude surpassed $100 per barrel for the first time in months following the escalation of tensions in the Strait of Hormuz, a development that reignited fears of inflation and triggered a widespread decline in risk appetite.
The European Central Bank kept interest rates at 2.25 per cent, in line with market expectations. However, Christine Lagarde’s tone was more hawkish than anticipated, leaving open the possibility of a 25-basis-point rise in September should inflation continue to prove stubborn, a development that added pressure on both fixed income and equities.
The earnings season delivered mixed results. Whilst Nokia, Roche and Dassault Aviation reported figures above forecasts, the reception to technology results in the United States was cooler, raising doubts about the future profitability of the heavy investments made in artificial intelligence.
A day of further rises in sovereign bond yields. The rise in oil prices and the ECB’s more hawkish tone reinforced expectations that interest rates will remain high for longer.
Against this backdrop, the yield on the 10-year German Bund rose to 3.20%, up 4 basis points; the yield on the Spanish bond reached 3.67%, up 4 basis points; and the yield on the US Treasury rose by 4 basis points to 4.70%.
Brent crude rose by 7% to over $100 per barrel, becoming the session’s main focus following the escalation of tensions in the Middle East.
By contrast, gold surprised the market with a 1.9% fall, weighed down by the strengthening of the dollar and rising real yields.
In the foreign exchange market,the EUR/USD fell by 0.3% to 1.138, reflecting the strength of the US dollar.
