Jamie Spencer
European stock markets opened the week with gains as eased tensions in the Middle East and declining oil prices boosted investor sentiment. Major indexes across Europe edged up on Monday, marking a positive start to a week filled with significant economic data releases and corporate earnings reports. Cooling geopolitical risks and falling crude prices added to the upbeat mood, while investors closely watched for updates from key companies and economic indicators that could shape the near-term market outlook.
Stocks Climb as Middle East Tensions Cool
The geopolitical atmosphere in the Middle East showed signs of easing following Israel’s airstrikes on Iran over the weekend. Although concerns about potential attacks on oil and nuclear facilities had initially rattled markets, Israel’s targeted response left these critical infrastructures untouched. “The more targeted response from Israel leaves the door open for de-escalation,” noted analysts at ING. While uncertainty around possible Iranian retaliation remains, the limited scope of the strikes provided a measure of relief for investors, reducing the need for safe-haven assets.
This development helped boost European indexes, with Germany’s DAX up 0.3%, the U.K.’s FTSE 100 climbing 0.4%, and France’s CAC 40 advancing by 0.7% in early trading. Investor optimism was also fueled by expectations of further economic stimulus from the European Central Bank (ECB) in light of the upcoming eurozone GDP and inflation reports.
Key Economic Data on the Horizon
With limited data releases on Monday, the week’s focus turned to upcoming economic reports. Eurozone third-quarter GDP and inflation figures are due, which could heavily influence the ECB’s stance on future interest rate cuts. The ECB has already enacted three 25-basis-point cuts this year, yet speculation is growing about a potentially larger reduction at the next meeting.
Germany’s latest export expectations, released by Ifo on Monday, indicated a drop to -6.7 in October from -6.5 in September. Notably, Germany’s automotive and metal industries foresee significant challenges in international trade, reflecting the broader challenges facing Europe’s largest economy.
The U.K. will also be under the microscope this week as Britain’s newly elected Labour government presents its first budget on Wednesday. Across the Atlantic, U.S. economic updates will culminate in the monthly jobs report on Friday, a closely watched indicator that could sway global markets.
Philips Lowers Sales Forecast as Earnings Season Rolls On
In corporate news, Dutch medical device company Philips saw its stock tumble 17% after revising down its 2024 sales forecast. The company now projects comparable sales growth between 0.5% and 1.5%, a marked reduction from its previous estimate of 3% to 5%. Slowing demand in China weighed heavily on its third-quarter performance, contributing to a 2% decline in order intake.
As earnings season heats up, markets are also looking to the highly anticipated results from major U.S. tech players, known as the “Magnificent Seven.” Google parent Alphabet is set to report on Tuesday, followed by Microsoft and Meta Platforms on Wednesday, and Apple and Amazon on Thursday. With tech giants driving a significant portion of market gains over recent years, their earnings are expected to heavily influence investor sentiment across global markets.
Crude Prices Plunge Amid Eased Middle East Risks
Oil prices took a significant hit on Monday as geopolitical tensions in the Middle East receded. Israel’s restrained approach to its strikes on Iran—avoiding direct impact on oil and nuclear infrastructure—helped to alleviate fears of a supply disruption in the oil-rich region. Brent crude dropped 5.1% to $71.78 per barrel, while U.S. crude (WTI) was down 5.2% at $68.03 per barrel.
The reduced risk of an oil supply shock prompted traders to readjust their risk premiums on crude. Additionally, with seasonal demand for oil expected to soften in the coming months, the focus has shifted from geopolitical concerns to more fundamental factors affecting oil demand. Although Iran downplayed the attack’s impact, the nation still indicated it may retaliate, leaving a degree of unpredictability in the region.
European markets have started the week on a positive note, lifted by easing geopolitical concerns and declining oil prices. With crucial economic data releases and key corporate earnings on the horizon, the coming days are likely to shape investor expectations around monetary policy and global economic performance. While the European markets show resilience, all eyes remain on developments in the Middle East and the earnings of leading tech companies, as these factors may drive market dynamics in the short term.
