Market Wrap: Capital Flees Europe 🇪🇺 📉

Markets

• European Equities: The European session is marked by deep declines. The largest outflows are seen in emerging markets (Poland's W20: -1.6%), though the broader European market is losing only slightly less (EU50: -1.3%). The sell-off is broad-based, hitting growth (Tech: ASML -3.4%), cyclical (Finance: HSBC -0.7%), and defensive sectors (Pharmaceuticals: Roche -2.8%, GSK -1.3%). The only "green island" today is the energy sector (Shell +1.4%, BP +2.0%).

• Corporate News: An experimental obesity drug from Roche and Zealand Pharma disappointed investors, delivering only a 10.7% weight loss after 42 weeks. Consequently, Zealand shares plummeted by a record 32%, and Roche fell by 3.3%. Despite minimal side effects, analysts doubt the compound will become a first-choice treatment in this highly competitive market.

• Currencies: The US Dollar Index is adding another 0.3% and currently sits at its highest level since December 2025. The euro is taking the biggest hit (EUR/USD: -0.4% to 1.156), while other safe havens are also in retreat: the Swiss franc (USD/CHF: +0.15%) and the Japanese yen (USD/JPY: +0.3%).

• Commodities: Gold is extending yesterday's correction by an additional 0.2% to $5,070, weighed down by further gains in the dollar. Brent crude is jumping another 5.7% to nearly $89, while WTI is surging by 8.7% to nearly $86 per barrel.

Economy and Politics

• Eurozone GDP: The latest GDP reading for the Eurozone was revised downwards from 1.3% to 1.2% YoY. In the fourth quarter of 2025, GDP growth in the Eurozone and the EU was driven by positive contributions from household consumption, government expenditure, and fixed capital investment. However, overall growth was dragged down by falling exports and a negative contribution from inventories.

• Fed Commentary: The Fed's Christopher Waller noted that the war in Iran should not lead to a long-term rise in inflation. However, his tone wasn't entirely dovish—Waller warned that an energy price shock stretching over weeks or months will be a problem for the Fed, noting that previous energy shocks have permanently raised price levels.

• US-Iran Conflict: In recent interviews, President Trump stated that Americans should anticipate the risk of Iranian attacks, noting that during war, "people die." He also announced that the goal of the military operation is complete regime change in Iran and the installation, with US support, of a new, "reasonable" leader, for which he already has specific candidates in mind.

• EU Response: Ursula von der Leyen and Antonio Costa will meet with Gulf country leaders on Monday to discuss the Middle East conflict. The EU is concerned about war escalation, as well as potential energy and migration crises. Due to these threats, EU meetings in Cyprus have been canceled, while aid to the region is being increased.

• Energy Security: According to the German Minister for Economic Affairs, "[energy commodity] markets remain liquid, and there are no problem about the security of gas supplies." However, the shutdown of LNG production in Qatar was a primary driver of the euro's decline, given the region's high economic sensitivity to commodity prices.

EU50 is at its lowest since December 2025, while EURUSD deepens losses below 1,1600 mark. Source: xStation5