Market Wrap: Bulls Return to Europe Thanks to U.S.-Iran Mediation and Data from Germany

Major European indices and futures are posting solid gains mid-session, continuing their rebound following a weaker start to the week.finance.yahoo+1

DE40 futures are up by around 0.80 per cent, the EU50 is rising by 1.10 per cent, and the pan-European STOXX 600 is trading in positive territory following the previous session’s losses, as investors price in the prospects of a de-escalation of the conflict in the Middle East.

The main driver behind the market movement is news of mediation between the US and Iran regarding a 10-day ceasefire, which is limiting the geopolitical premium in energy commodity prices and calming sentiment on the stock markets.

The rise in Germany was also driven by a significant jump in the ZEW index – the investor confidence indicator rose to 26.3 points from 10.5 points, well above forecasts (17.5 points), which economists attribute to Chancellor Merz’s pension and tax reforms.

WTI and Brent crude are rising slightly in real terms (Brent at around $90/bbl), although earlier in the session they had fallen by as much as 1 per cent, as the market weighs up the risk of a ceasefire against the threat of a naval blockade of Saudi Arabia by the Yemeni Houthis.

The dollar remains stable/slightly weaker (USDIDX index -0.05%), whilst gold is up by over 1% to around 4,065 USD/oz, and silver is recording a spectacular rise of over 5%, driven by hopes of de-escalation and easing inflationary pressure.

The technology sector is performing best (+2.12% contribution to the index), led by ASML and Infineon, followed by the energy sector (+1.52%) and the industrial sector (+0.93%).

The worst-performing sectors are telecoms/communications (-1.29 per cent, dragged down by Prosus and Deutsche Telekom), materials (-0.71 per cent) and healthcare (-0.24 per cent).

Company information

The biggest movements on the Euro Stoxx 50 today are being seen in technology and industrial companies, which are rising, whilst financial and telecoms companies are falling.

• ASML (+2.89%) leads the gainers, buoyed by a rebound in the semiconductor sector following recent volatility, whilst Infineon is up 2.88%.

• Siemens Energy is up 2.75 per cent and TotalEnergies is up 1.77 per cent, benefiting from the rebound in oil and gas prices.

• On the other hand, Muenchener Rueckversicherung is down 2.01 per cent and is the worst-performing company in the index, whilst Wolters Kluwer is down 1.66 per cent, Prosus 1.34 per cent and Deutsche Telekom 1.21 per cent.

• Outside the flagship index: Novartis is rising after its second-quarter operating profit (US$5.94 billion) beat market expectations despite a 50 per cent drop in sales of the drug Entresto due to competition from generics; Julius Baer is down 4.2 per cent despite improved net inflows; and Schindler is down 5.1 per cent following weaker quarterly revenue.

• Norwegian firm Vaar Energi is acquiring BlueNord for approximately US$1.33 billion, creating Europe’s largest independent oil and gas producer – shares in both companies are up by 5.3 per cent and 6.3 per cent respectively, whilst Vaar is increasing its second-quarter dividend to US$350 million.

• Wienerberger is down 6.5 per cent following a full-year profit warning, whilst Boliden is down 6.9 per cent after reporting an operating profit below forecasts, making it one of the biggest fallers in the broader STOXX 600 index.