European markets closed lower, with most sectors also in negative territory. Among the worst performers were the financial services and telecommunications companies. The price of oil maintained the upward behavior that characterized it last week, so stocks of major oil majors closed today’s session higher.
European markets ended today’s session in different directions, with investors attentive to political and economic issues. The behavior of the foreign exchange market also influenced the course of the market, and the Euro registered a devaluation against the US Dollar. In sectoral terms, oil companies were among the best performers (still reflecting the recent rise in the price of oil), while the telecommunications sector lost more than 1%. For the banking sector, Commerzbank rose 3.79%, after having reported a quarterly profit of 250 M. €, surpassing the forecasts of 178 M. €. This differential was achieved through lower provisions and a tax credit. Banking income declined 3.70% to 2300 M. €, slightly higher than the forecast of 2270 M. €. In a statement, the bank mentioned the conditions caused by the slowdown of the German economy in the first quarter and by the growing tensions between the US and China. Still in Frankfurt, but as an opposite reaction (-5.82%), ThyssenKrupp reported an EBIT of 500 M. €, substantially in line with forecasts. Profits from steel production, the company’s largest activity, doubled over the same period last year. In terms of economic indicators, the GDP of the Euro Zone for the first quarter showed an annual growth of 2.50%, in line with expectations.
The behavior of the bond and exchange markets will continue to dictate the course of the European stock exchanges. Yesterday, the strong rise in US yields generated a strong increase in world yields. This increase in interest rates could be strengthened by the increase in geopolitical risk. The intensification of geopolitical tensions has two focuses: the Middle East and the Korean Peninsula. In the Middle East, the situation in the Gaza Strip adds yet another focus of potential conflict in the region. The main difference with similar situations is that Iran has bases in Syria where it can reach Israel and also suffer the attacks of this country. As already mentioned, Syria is a country where several powers intervene with objectives often antagonistic. North Korea’s cancellation of talks (threatening the meeting with President Trump in June) could push back steps in the past month. It is not yet known whether this North Korean decision (fomented by joint US-South Korean military maneuvers) is a negotiating strategy or a real retreat in the pacification process of the peninsula.
European stock markets ended higher, with utilities among the best performers. French Suez reported results that were well received by investors, with revenues surpassing forecasts. Its shares gained 3.60%. Also the stocks of retailers stood out positively, favored by the behavior of the online retailer Ocado. However, the rise in the price of oil benefited the respective sector. Total rose more than 1%. According to CNBC, the French oil company is considering abandoning its activity in Iran. In the telecommunications sector, the Dutch company Altice advanced 12%, with the news that SFR, its French division, showed signs of recovery in the first three months of the year.
In the pre-opening, the European indices rehearsed in different directions, in a context of intensification of the geopolitical tensions, after the declarations of the North American President. The debt market will continue to be monitored after the 10-year U.S. treasury yield have peaked at seven-year highs. On the other hand, the rise in the price of oil (favored by strong demand and continued cuts in production by OPEC) is expected to continue to influence its sector and the market as a whole.
In the pre-opening, the European indices continued to rise, reflecting the positive developments in trade relations between the US and China. However, the activity of European markets will be less than usual due to the celebration of Pentecost Day in mostly Protestant countries like Germany and Switzerland. Even so, an initial positive reaction is likely from the sectors most prone to exports (especially to China) such as the automobile, mining, industrial, and others. After this reaction, European investors will focus on two interrelated themes: sovereign yields and the evolution of the political situation in Italy.
Recent developments in the face of trade tensions between the US and China have cheered the European stock markets in this first session of the week.
The stock market activity was less intense as the Frankfurt and Swiss stock exchanges were closed yesterday for the celebration of Pentecost Day.
Recent declines in the Euro have led the common currency to the most extreme oversold levels since November 2016. Yesterday the Euro showed some signs of stabilization, which may be the prelude to a short-term technical recovery.
BMW and Daimler fell more than 2%. On the contrary, the telecommunications companies registered gains. Deutsche Telekom said it expects average annual revenue growth of 1% to 2% by 2021.
Yesterday European markets ended slightly lower. The uncertainty associated with the political scenario in Italy continued to influence investor sentiment and had repercussions on the stock and debt markets. Banks’ stocks were the most penalized. In the foreign exchange market, the Euro maintained its downward trajectory against the US Dollar, thus moving towards the 6th consecutive week of falls.
Next Monday, American markets will be closed, celebrating the Memorial Day.
The first day of the week was negative for most European markets and especially for the Italian stock market. As expected, market activity was much lower than usual, as the London and North American stock markets are closed: in the United Kingdom the “Spring Bank Holiday” is celebrated and in the USA the “Memorial Day”. In sectoral terms, the variations were not very marked, and the producers of raw materials stood out in the positive. The Italian stock exchange closed with a fall of 1.99%, and the banks were the main catalysts of this trend. With respect to the debt market, 2-year Italian yields from Treasury Bonds rose to levels around 0.862%, while 10-year TBs declined further to stand at 2.659%. In the foreign exchange market, the Euro suffered a slight devaluation against the Dollar.
The political situation in Italy and Spain created a scenario of fear and risk aversion that was seen today in the financial markets. In Italy, Carlo Cottarelli, nominated by the President of the Republic, will try to form a government that is likely to be presented tomorrow to the President and will have to submit to the vote of the Parliament and the Senate. Despite the charisma it brings, it is unlikely that Cottarelli’s team will win the vote of the two legislative chambers, both dominated by the 5 Stelle Movement and Lega Nord. On the other hand, in Spain Parliament debates on Thursday and Friday the motion of censure presented by the Socialists, after the sentence of the National Audience, which condemned the Popular Party (led by Rajoy) for one of the most corrupt cases in recent years in Spain.
Fears about the political situation in Italy have eased, giving investors some less risk aversion. The main indexes closed in different directions. In the foreign exchange market, the Euro recovered part of the lost ground in the previous sessions, having been fixed against the Dollar at USD 1.16. In business terms, Bayer rose more than 4 percent as investors monitored the news that US authorities had authorized the purchase of Monsanto by the German company for 66 M.USD after a two-year process, which lays down the obligation to establish the sale of the agricultural unit of Bayer to BASF. Regarding the economic indicators published today, the consumer confidence index in the Euro Zone fell in May from 112.7 to 112.5.
Stock trading continues to be penalized by fears of political instability in Europe. With the scenario in Italy moving towards a resolution via a “political government” but the outlook in Spain to point to the fall of government tomorrow with the vote on the motion of censorship. But the concern that we are facing an imminent trade war is also in the offing, with US President Donald Trump adding more fuel to the fire.
In the pre-opening, the European indices rehearsed with some gains. As a first step, financial markets should react to the formation of a new government in Italy. After the negotiations were over, President Mattarella appointed Giuseppe Conte to the position of Prime Minister. Giuseppe Conte will have as deputy prime ministers, Matteo Salvini and Luigi di Maio, the leaders of the Nord League and the 5 Stelle Movement. For the finance portfolio Giovanni Tria, an academic, was appointed, with very critical positions on the path that the European integration process has taken, blaming Germany for it. In an initial phase, Italian assets may react favorably to the end of the impasse but will later consider the positions defended by Giovanni Tria. In addition to the new developments in Italy, European investors will have to face another challenge: the imposition of tariffs on European exports of steel and aluminum to the US. Donald Trump’s decision raises the specter of a phase of protectionism that will shake up world trade.
The beginning of the week was marked by a positive trend registered by most European indices and by various sectors of activity. The utilities and banking sectors lead the gains. Societe Generale rose 0.73%, while Unicredit fell 1.34% on the day the Financial Times said the two institutions are considering a merger. This news was not officially confirmed. On the other hand, Air France KLM was among the best performers, after AccorHotels said that it is analyzing the acquisition of a stake in the airline.
On the macroeconomic front, the PMI economic activity index for the Euro Zone fell to the low of the last 18 months to 54.10, in line with expectations. The same indicator, but relative to the services sector, was 53.80, compared to the expected 53.90.
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European markets closed in different directions, though contained. During today’s session, investors’ sentiment was influenced by the political situation in Italy, as well as the comments made by the central banks. Yesterday, just a few “more populist” words from the new Prime Minister Conte in the Senate were enough to cause a rise in Italian yields (especially those with a maturity of two years). Today, this upward movement of Italian sovereign yields remained, which again penalized the banking sector.
In the pre-opening, the European indices rehearsed with some gains. Today will be the scene of the contrast between two factors. On one hand, the good performance of Wall Street, which should benefit the most cyclical sectors in Europe. But on the other hand, investors will have to face a new upward movement in yields but this time has a different nature. Yesterday, the session was driven by a rise in sovereign yields, but unlike in previous days, was not due to the political situation in Italy. Spurring the new upward movement of these interest rates were statements by Peter Praet. The ECB’s Chief Economist has stated that this institution is progressively more confident that it will reach its goal of 2% of inflation. These statements indicate that during next week’s meeting the topic on the end of the debt acquisition program will certainly be debated.
The day was slightly negative for most European markets, with investors waiting for the G7 meeting this weekend in Canada as well as the European Central Bank meeting next week. In fact sales pressure has focused mainly on the financial, automotive, chemical and commodity sectors. In Germany, the economic data published sparked fears about the state of the country’s economy. After yesterday data on orders to industry have disappointed the market, today it was announced that industrial production fell 1% in April compared to the previous month (against a forecast of a slight increase of 0.30%), while exports decreased 0.30%, in line with the estimates. In some German newspapers circulate rumors, not confirmed, that Deutsche Bank is studying a merger with Commerzbank. In this market, Commerzbank fell 1.96% and Deutsche Bank fell 1.22%.