Market Wrap: Energy Makes a Comeback⚡Investors Fear a New Escalation in the Middle East💥

Market Overview:

• European stock indices, including the pan-European STOXX 600, are mostly down, whilst the main US index futures are also falling due to renewed concerns about rising inflation.

• However, the German DE40 contract has managed to buck this market weakness and is up by around 0.36%.

• The main factor driving current sentiment remains the war between the US and Iran, which has been ongoing for over two months and has led to the blockage of the Strait of Hormuz, a key shipping route.

• This conflict is fuelling market fears of a sharp rise in energy prices, which in turn is forcing major central banks to maintain a hawkish stance and keep interest rates higher.

• As a result of these geopolitical tensions, oil prices continue to rise, with Brent crude surpassing the $110 mark, gaining over 0.5%.

• The US dollar, meanwhile, is trading slightly lower today (the USDIDX index is down 0.14%), which opens the way for a slight rise in the EUR/USD exchange rate.

• Turning back to the stock markets, the energy sector is by far the best performer in the current climate; it is the only sector in the eurozone currently showing solid growth momentum, driven by rising commodity prices.

• By far the worst-performing sectors, however, are materials, consumer discretionary and healthcare, which are most heavily weighed down by concerns over a slowdown in demand and high financing costs.

Index and sector chart – What drives the market?

The sectoral breakdown of the Euro Stoxx 50 index highlights the broad scope of today’s sell-off, from which only the energy sector—up by a fraction of a per cent—managed to emerge unscathed. Source: XTB

The sentiment map for major European blue chips shows a clear advantage for sellers, who have dominated key market sectors today, including finance and industry, leaving room for only a few isolated pockets of green. Source: XTB

A look at the session’s top performers and laggards confirms that, whilst Intesa Sanpaolo and BNP Paribas are leading the declines with losses of over 3 per cent, at the other end of the spectrum, Deutsche Boerse and Infineon Technologies are proving most resilient against selling pressure. Source: XTB

Company information:

• Investors’ attention is largely focused today on Samsung Electronics (SMSN.UK), whose shares are rebounding strongly, thereby preventing the Korean index from entering deep correction territory. This rally in the tech giant’s shares is the result of the resumption of negotiations with the main trade union; investors have welcomed with relief the willingness to compromise and the court’s decision limiting the possibility of a strike, which reduces the risk of a disruption to global memory chip supplies.

• Ryanair is standing out for all the wrong reasons on the European market, with its shares falling by over 4% following warnings of higher operating and fuel costs, as well as worse-than-expected forecasts for ticket prices during the summer holiday season.

• At the other end of the spectrum is Deutsche Boerse (DB1.DE), up 3% following the market’s positive reaction to the news that the well-known fund TCI has acquired a stake of over 5% in the German stock exchange operator.

• French advertising giant Publicis (PUB.FR) also had a successful day, gaining around 2.7% following the announcement of a $2.2 billion takeover of the US data analytics firm LiveRamp.