The Stoxx Europe 600 fell by 0.5% in a very volatile session that began with sharp declines following new American attacks on Iranian territory; followed by a subsequent recovery and closing with a new drop erasing the partial recovery of the afternoon.
The sectoral evolution showed a widespread decline, with energy and materials seeing drops of over 1%. As a less negative note of the session, industry remained practically flat. Bayer and Philips stood out with gains, against the significant losses of TeamViewer, in a context of greater selectivity towards technology companies.
At the close of the session, the Euro Stoxx 50 fell by 0.5%, the IBEX 35 by 0.8%, and the FTSE 100 dropped by 1.1% in a session dominated by strong volatility.
The main factor of the day was the evolution of tensions in the Middle East. The new American attacks on the Iranian island of Qeshm, located in the Strait of Hormuz. Subsequently, oil retreated after new American statements regarding military policy in the region. The speed of these movements highlighted the sensitivity of the markets to any news that could alter energy supply prospects, inflation, and growth.
Energy uncertainty coincided with the midterm elections in the United States, the results of which could alter the outlook for fiscal policy, regulation, and public spending. At the same time, the technology sector continued to focus on the ability of large companies to monetise their investments in artificial intelligence.
Wall Street showed more favourable behaviour in large tech stocks than in the overall market. The S&P 500 was up 0.4% and the Nasdaq 0.9%, while the Dow Jones fell by 0.4%. This divergence reflected a selective recovery in technology, without concerns about valuation, costs, and investments in artificial intelligence disappearing.
Fixed Income
Fixed income recorded moderate movements compared to commodity volatility.
The yield on the 10-year German Bund was at 3.32%, 2 basis points above Monday. Meanwhile, the yield on the 10-year US Treasury was around 4.95%, rising by 4 basis points. The combined reading continued to show the importance of inflation risk stemming from energy for long-term yield curves.
Commodities and Currencies
The Brent experienced a day of strong fluctuations. After initially surpassing 107 dollars per barrel and rising more than 1.5% during the morning, the asset closed at 103.5 dollars per barrel, a decline of 1.2%.
In currencies, the EUR/USD remained close to 1.119 dollars per euro, with a small intraday variation. The relative stability of the exchange rate contrasted with the greater fluctuations in oil and some segments of equity. Looking ahead to the next sessions, the evolution of the dollar will partly depend on the Federal Reserve's interest rate expectations and demand for safe-haven assets amid geopolitical conflict.
