Stock markets weighed down by bond yields; the spread soars. Banks fall in Milan

(Il Sole 24 Ore Radiocor) – Sky-high bond yields, tensions over oil and fears of rising inflation continue to keep European stock markets at the start of October, following the difficulties already encountered in September. The euro yield curve continues to shift upwards, whilst rates and spreads are returning to levels not seen for some time. In the United States, the 10-year Treasury yield has risen to 5.342 per cent, surpassing the previous peak set in 2007 and reaching its highest level since early 2002. The driving force behind this shift is the shock currently affecting the energy markets following the crisis triggered by transit difficulties in the Strait of Hormuz, as we enter the eighth month of hostilities between the US and Iran. Expectations of persistently high inflation are also fuelling speculation about further interest rate hikes by the ECB and the Fed. For the US central bank, however, expectations of a rate rise in October have diminished, following better-than-expected inflation figures for August. According to the CME FedWatch, the probability indicated by market participants has fallen to 37 per cent (from 71 per cent a week earlier).

Volatility continues to prevail in the energy sector. Encouraging signs regarding crude oil flows from the Persian Gulf – which are reported to have returned last week to levels close to those seen before the conflict – pushed oil prices down, with Brent falling by more than 6 per cent to below $98 a barrel at the start of the day. However, the trend then reversed and the price rebounded to above $100 a barrel, down by around 3 per cent. WTI, on the other hand, continued its upward trajectory. Meanwhile, according to the FT, US President Donald Trump is reportedly insisting on a controversial ban on the export of American diesel, intended to cool prices ahead of the mid-term elections.

In this scenario, all the major European stock markets are suffering: Milan (FTSE MIB ), Paris (CAC 40 ), Frankfurt (DAX 40 ), Madrid (IBEX 35 ) and London (FTSE 100 ).

Wall Street retreated after an initial rise, weighed down by a further increase in US Treasury yields and oil prices. Micron has reported exceptional profits, with turnover quadrupling in the last quarter. However, these results are not enough to boost other companies linked to artificial intelligence: Nvidia Corp , AMD and Broadcom soon gave up their initial gains and are trading below par. Also in the red is Alphabet is also in the red, having unveiled its latest artificial intelligence model, Gemini 4 Argon. The new model offers improvements in terms of cybersecurity, programming and complex professional tasks, Alphabet said. Meanwhile, yields on 10-year US Treasury bonds stood close to their highest levels since 2002, as did those on 30-year bonds.

On the Milan Stock Exchange, leading the way is Fincantieri is leading the way, buoyed by positive prospects for defence spending following the initial publication of the European Defence Agency’s report. Stmicroelectronics and Technoprobe are weakening following the rally of recent days. On the rise: Prysmian is on the rise, with DB analysts forecasting a ‘solid’ quarterly result, driven by the data centre cable business. Well positioned Campari is looking strong following BofA’s upgrade to ‘buy’. Banking shares down: ahead of the major shareholders’ meeting on 29 October, Banca Monte Paschi Siena has clarified that the approval of the two public offers for Banco Bpm and Banca Generali will be separated from the acquisition of 13.3 per cent of Generali as part of Mediobanca , whose merger would – if approved – guarantee a special dividend for shareholders, leaving the bank with an 8.8 per cent stake in Generali. Meanwhile, according to the German media, after around two years of opposition, the trade unions at Commerzbank have reportedly informed Unicredit that they were willing to cooperate. Bringing up the rear is Telecom Italia and Poste Italiane, now grappling with the race to realise synergies following the conclusion of the takeover bid.