by Diana Mandia
(Reuters) – European stock markets ended cautiously higher on Monday, as hopes that diplomatic efforts prevent further escalation in the Middle East supported markets despite lingering uncertainties.
In Paris, the CAC 40 ended up 0.43% at 8,045.11 points. The British Footsie, the only exception among the main indices, lost 0.45%, weighed down by the fall in precious metals and a series of company announcements, while the German Dax gained 0.41%.
The EuroStoxx 50 index gained 0.48%, the FTSEurofirst 300 0.05% and the Stoxx 600 0.06%.
Markets, which had fallen on Friday due to geopolitical tensions, were somewhat relieved on Monday by calls from world powers for Israel to show restraint following the large-scale attack by Iran on Saturday, which helped stabilize oil prices and reduce demand for safe-haven assets such as bonds.
The markets also seem to have already factored in the possibility of retaliation from Iran.
“The price of an attack has been widely assessed in the days leading up to it. Moreover, the limited damage and the fact that there were no casualties means that Israel’s response will be perhaps more measured,” said Warren Patterson, an analyst at ING.
The markets also remain supported by the latest decision of the European Central Bank (ECB), which left rates unchanged on Thursday, while opening the door to a next reduction which for most operators will take place in June.
According to Philip Lane, chief economist of the ECB, the expected convergence of euro zone inflation towards the 2% target in 2025 will be sustained, thanks in particular to a reduction in pressure on labor costs. work and a further reduction in corporate profits.
VALUES
In Europe, the defense sector was one of the main winners of the session (+0.8%) after the Iranian attack.
The industrial and automobile sectors, for their part, recorded increases of 0.79% and 0.67% respectively after the economic institute Ifo declared that German manufacturers were no longer seriously affected by material shortages.
Banking software company Temenos rose 19%, topping the STOXX, after saying a “special committee” found accusations in a Hindenburg Research report to be incorrect and misleading.
Ageas advanced 3.1% after BNP Paribas (+0.6%) announced that it had signed an agreement with the Chinese group Fosun to acquire its 9% stake in the Belgian insurer, for around 730 million euros. .
Adidas gained 4.1% after Morgan Stanley raised its recommendation on the group from “underweight” to “overweight”.
Lufthansa, which on Monday revised downwards its profit outlook for the year 2024 after costly strikes, dropped 4.5%.
A WALL STREET
The New York Stock Exchange pared early gains and the Nasdaq briefly turned lower after U.S. retail sales beat expectations in March.
At closing time in Europe, the Dow Jones gained 0.45%, the Standard & Poor’s 500 0.36% and the Nasdaq Composite 0.15%.
TODAY’S INDICATORS
In Europe, industrial production in the euro zone increased by 0.8% over one month in February, in line with expectations, according to data published Monday by Eurostat.
In the United States, retail sales showed stronger growth than expected over one month in March, which once again demonstrates the solidity of the American economy, while the resilience of the job market supports household spending despite inflation and rising borrowing costs.
CHANGES
The dollar rose Monday (+0.05%) against a basket of benchmark currencies after US retail sales increased more than expected in March, a new data on the good health of the US economy likely however, to push back expectations regarding the date of the Fed’s rate reduction.
The dollar index stands at 106.05 after reaching its highest level since November 3. The euro is stable at 1.0644 dollars.
The Japanese yen weakened 0.66% against the greenback, reaching a 34-year low of 154.29 per dollar.
RATE
Euro zone yields rose on Monday as fears of an immediate escalation of conflict in the Middle East eased.
The German ten-year yield rose 7 basis points to 2.43% after falling 11.8 bps on Friday, and the two-year rate rose 4.7 bps to 2.90%.
The American bond markets are also moving forward with the publication of data on retail sales in the United States: the ten-year bond gains 13 basis points to 4.64%, reaching its highest level since November, and the two-year bond markets 6 .8 bps at 4.95%.
OIL
Oil prices fell on Monday despite tensions in the Middle East, the markets having already fully integrated the risks of an escalation.
Brent fell 1.2% to $89.35 per barrel, with light American crude (West Texas Intermediate, WTI) losing 1.23% to $84.61.
(Writing by Diana Mandiá, editing by Kate Entringer)
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