A trader on the Frankfurt Stock Exchange, Germany
by Claude Chendjou
PARIS (Reuters) – European stock markets ended lower on Monday and Wall Street was on a cautious note at mid-session, with the conflict between Israel and Hamas weighing on stock markets in a safe-haven movement towards safe assets like sovereign bonds, gold and the dollar.
In Paris, the CAC 40 ended down 0.55% at 7,021.4 points. The British Footsie, supported by oil stocks, limited its losses to 0.03%. The German Dax fell by 0.67%.
The EuroStoxx 50 index lost 0.77%, the FTSEurofirst 300 0.19% and the Stoxx 600 0.26%.
At the close in Europe, the Dow Jones was stable (+0.06%), while the Standard & Poor’s 500 fell by 0.03% and the Nasdaq by 0.41% in a context of fear of a escalation in the Middle East.
Clashes continued on Monday between the Israeli army and Hamas fighters and while Israel, which is preparing a major offensive, called up 300,000 reservists, a mobilization never before achieved, two days after the surprise attack of the Palestinian group .
Some analysts believe that with this attack Hamas also wanted to deal a blow to Washington’s efforts to obtain a normalization of ties between Israel and Saudi Arabia, which could threaten the recent rapprochement between Riyadh and Tehran.
Iran and Saudi Arabia are both major oil producers whose prices jumped more than 4% on Monday amid uncertainty.
The index measuring volatility on Wall Street jumped 4.35% to 18.21 points, a sign of investor anxiety. Its equivalent on the Euro Stoxx 50 ended up 8.55% at 20.23 points.
“The coming days are likely to be determined by geopolitical risks rather than fundamentals,” predicts Mohit Kumar, chief economist for Europe at Jefferies.
“For markets, geopolitical risks add additional uncertainty while investor convictions are already low,” he adds.
VALUES IN EUROPE
In a context of geopolitical tensions, defense stocks were sought after, notably allowing Thales (+4.69%) to finish at the top of the CAC 40.
The Swedish groups Saab, Italian Leonardo and German Rheinmetall advanced by 9.07%, 4.79% and 7.14% respectively.
The airlines IAG, Air France
Luxury stocks have been neglected while LVMH (-2.60%) is due to publish its third quarter results on Tuesday. The sector index fell 1.81%%.
OIL
The oil market is on a sharp rise in the face of the conflict between Israel and Hamas while OPEC has also revised upwards its forecast for long-term crude demand, now estimating it at 116 million barrels per day in 2045.
Brent rose 4.22% to $88.15 per barrel and American light crude (West Texas Intermediate, WTI) gained 4.43% to $86.46.
RATE
The American bond markets are closed this Monday due to Columbus Day.
In Europe, risk aversion, which causes strong demand for sovereign bonds, has reduced their yields: that of ten-year German government bonds fell by 12.6 basis points, to 2.771%, while that the two-year yielded 9.5 points, to 3.036%.
GOLD
Gold, a safe haven asset, jumped 0.99% to $1,850.4 per ounce, after hitting a session high since September 29, due to uncertainties triggered by the conflict between Israel and Hamas.
EXCHANGES Taking advantage of its status as a safe haven asset, the dollar gained 0.26% against a basket of reference currencies.
The Japanese currency, another safe haven asset, is also in demand, advancing -0.4% to 148.72 yen per dollar, despite the closure of Japanese stock markets due to a public holiday.
The euro, on the other hand, fell -0.43% to 1.0541 dollars, while the pound sterling lost -0.25% to 1.2202 dollars.
In Israel, the shekel lost another 2.91% to 3.945 per dollar, despite an intervention by the Israeli Bank to mitigate the volatility of the country’s currency.
TODAY’S INDICATORS
The only statistic of the day, German industrial production fell by 0.2% in August compared to the previous month, slightly more than expected, according to data from the Federal Statistical Office.
TO BE CONTINUED ON TUESDAY:
(Writing by Claude Chendjou, edited by Kate Entringer)