Stoxx 600 falls as fragile Middle East ceasefire dents risk sentiment
Money markets currently expect three hikes from the ECB before the end of the year
Add BT as a preferred source
[BENGALURU] Europe’s Stoxx 600 closed 1 per cent lower in broad-based declines on Tuesday (May 12) as dimming hopes for a US-Iran peace deal sent oil prices higher and weighed on risk sentiment.
The pan-European Stoxx 600 dropped 1.1 per cent to 606.12 points, with all major regional bourses in the red, led by Frankfurt’s DAX which fell 1.6 per cent.
The disruption to energy supplies through the Strait of Hormuz has acted as an overhang on European equities, keeping them below pre-war levels, as worries linger over the economic impact of elevated crude prices.
Technology shares slid 3.1 per cent and led declines on Tuesday, tracking steep losses among artificial intelligence stocks and chipmakers on Wall Street. Tech stocks globally had a strong run over the past few weeks and in Europe, they are among the top gainers.
Inflation data
“The rising price of oil also shows the energy dependence of Europe, and that dependence is harming European companies more than elsewhere. This is a brilliant reminder that there’s also military dependency, security dependency in Europe, which places Europe into basically the shackles of dependency,” said Florian Ielpo, head of macro at Lombard Odier Investment Managers.
Reflecting increasing price pressures, a final estimate showed Germany’s inflation accelerated slightly to 2.9 per cent in April, while elsewhere US consumer prices rose at a steady pace for a second straight month in April.
Navigate Asia in
a new global order
Get the insights delivered to your inbox.
US President Donald Trump said that the ceasefire with Iran was “on life support”, with Teheran rejecting a US proposal to end the conflict and proposing a list of demands that Trump dismissed as “garbage”.
Defence stocks remained under pressure, lost 1.8 per cent and marked their fourth straight day of losses.
Political uncertainty in Britain
Meanwhile in Britain, Prime Minister Keir Starmer was facing calls to step down following one of the worst defeats for Labour in last week’s local elections.
British heavyweight banks such as Barclays and Lloyds fell 3 per cent and 4 per cent, respectively.
A 6 per cent fall in Munich Re weighed on the insurance sector after the German reinsurer posted disappointing property and casualty revenue in the first quarter.
On the policy front, European Central Bank (ECB) policymaker Joachim Nagel said that the bank must raise interest rates if the oil shock due to the Iran war threatened to unmoor inflation expectations in the eurozone.
Money markets currently expect three hikes from the ECB before the end of the year.
Among others, Intertek advanced 6.4 per cent after Swedish private equity group EQT made a final sweetened £9.4 billion (S$16 billion) takeover proposal for the British product testing company.
Shares of Bayer jumped 3.6 per cent after the German firm reported a better-than-expected quarterly operating profit. REUTERS
Decoding Asia newsletter: your guide to navigating Asia in a new global order. Sign up here to get Decoding Asia newsletter. Delivered to your inbox. Free.
Share with us your feedback on BT's products and services
