Stock market: Europe regains confidence as tech shares rebound and Brent crude returns to pre-war levels

(Il Sole 24 Ore Radiocor) - Falling oil prices and Micron’s results restoring confidence in tech are driving optimism in Europe, with all indices in positive territory and with the FTSE MIB aiming to regain the 52,000-point mark. The rebound in tech shares has buoyed Asian stock markets and is driving buying activity overseas too, where US futures are up (Nasdaq futures by 2 per cent).

It was the results of the US chip giant Micron, with a third quarter that exceeded expectations and encouraging prospects for data centres and AI. The share price soared in after-hours trading (+17.7%). Micron’s figures beat expectations with record revenue of $41.58 billion (+356% compared to last year), EPS of $25.11 per share compared with estimates of $20.78, and a gross margin of 84.9% compared with estimates of 81.6%. David Pascucci, market analyst at XTB, points out that “demand for AI is driving the share price, in line with the sector as a whole, and the stock market is responding with a very encouraging 3 per cent rise on the Nasdaq from low to high and a 5 per cent rise on the Nikkei from Wednesday evening’s low”.

The focus now shifts to the week’s other market mover, a key figure from the Fed’s perspective: US PCE inflation, which measures the average rise in prices for domestic personal consumption and takes account of changes in purchasing patterns. The debut of Kevin Warsh at the helm of the Fed signalled a shift in the US central bank’s narrative, as well as an openness to raising interest rates by the end of the year to combat inflation. With the Fed providing no guidance on the future direction of interest rates and presenting no projections for the so-called ‘dot plot’, the data is increasingly becoming the compass for investors. Expectations for PCE inflation point to a slight acceleration in the core figure to 3.4% from 3.3%, which may be nearing its peak, given the recent fall in oil prices. Also on the agenda is the third estimate of first-quarter GDP, which, according to MPS analysts, ‘should confirm the figures from the second estimate and the resilience of consumer spending’.

According to analysts, the fall in oil prices seen over the very last few trading sessions is not yet sufficient to curb the surge in prices. David Pascucci of XTB says, ‘It is too early to talk of a long-term decline in inflation; the time factor is crucial, even though prices (of crude oil, ed.) have fallen by over 40 per cent from the highs of $120 a barrel. To see inflation falling on a global scale, we would first need to see oil prices at these levels – around the $70–80 range – for several weeks in order to consolidate the decline and pass it on to prices in the real economy’. All the conditions for a sharp fall in inflation are therefore in place; all that is missing is the time factor, ‘which will play a key role in the evolution of the macroeconomic scenario’.

On the Milan Stock Exchange, the latest rally by SPrysmian Stmicroelectronics, followed by Prysmian, which benefits indirectly from the enthusiasm surrounding the sector through its cables business. Buying also seen in Enel and Diasorin, on which Kepler Cheuvreux has initiated coverage with a target price of 76 euros. Bringing up the rear is Lottomatica Group, whilst La Repubblica reports on a reform of land-based gambling in the coming months to avoid EU sanctions. “If the reform is approved, the likely increase in concession fees should be more than offset by synergies,” write analysts at Akros Bank. The defence sector remains weak as well, with Leonardo and Avio and Fincantieri .