Stock markets: the slump in Tokyo and Seoul spreads to Europe. Tech shares fall in Milan
Tech stocks slow down, whilst US inflation figures and bond yields are fuelling global volatility. Oil prices are falling but remain high, whilst the euro is recovering
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(Il Sole 24 Ore Radiocor) - European stock markets are under pressure, affected by the sharp fall in tech shares in Asia (Kospi -7.6%; Nikkei -4.9%) following the previous day’s decline on Wall Street. The better-than-expected results from Taiwanese chip giant TSMC did little to help: “The AI issue is practically dominating everything; it’s a sort of vortex,” commented Ryan Jungk of Newfleet AM. As a result, the FTSE MIB in Milan and the CAC 40 in Paris, the DAX 40 in Frankfurt, the IBEX 35 in Madrid, the AEX in Amsterdam and the FTSE 100 in London.
The sell-off on Wednesday was triggered by higher-than-expected US inflation, which brings a Fed rate hike closer and casts doubt on the sustainability of massive investments in AI, the economic returns from which remain uncertain. In this regard, according to the Financial Times, Anthropic – ahead of its eagerly awaited IPO – reported a 45 per cent rise in third-quarter revenue to $16.8 billion. On the macro front, US PPI, retail sales and unemployment figures are due.
Oil prices fall, but remain high
The rise in inflation is directly linked to the rise in energy prices, with oil prices remaining high, albeit on a downward trend: Brent down 1.5 per cent at $104.4 per barrel; WTI down 0.9 per cent at $94.2.
TTF gas prices are also falling, down 1 per cent to 86.2 euros per MWh in Amsterdam, but remain close to their highs since late 2022. Meanwhile, hostilities in the Middle East “have intensified, threatening further supply disruptions”, write analysts at ANZ Research. Tensions persist both on the Houthi front and with regard to Iran in the Strait of Hormuz.
Banks under close scrutiny: focus on tech
On the Milan Stock Exchange, the focus is entirely on tech stocks, which are weighing on the market following a trading halt in early trading: Technoprobe , Stmicroelectronics and Prysmian are all falling sharply. The banking sector is under scrutiny, with Commerz CEO Bettina Orlopp expecting the ECB to give the green light to Unicredit ‘in the coming days or weeks’, and rumours of a possible shift in the balance of power at Delfin, a major shareholder, amongst others, of Generali and Banca Monte Paschi Siena. The issue of windfall profits in the Budget Bill remains uncertain. Some oil stocks are also weak, including Saipem and Tenaris . The market was buoyed in particular by utilities, including Hera and Enel , whilst buying activity is also notable in Nexi and Campari, which is benefiting from better-than-expected results from France’s Pernod Ricard (+3.1% in Paris). The spotlight is also on Brunello Cucinelli, as its financial results are scrutinised.
Inflation-driven yields
The equity markets have also come under downward pressure due to the sharp rise in bond yields and volatility in the government bond market. Yields on long-term US Treasury bonds have surged, driven by inflation fears – fuelled by the global energy shock linked to the conflict in Iran – and by the steady rise in US public debt. The yield on the 10-year US Treasury note fell to 5.10 per cent, after briefly peaking at over 5.32 per cent on Wednesday. Earlier this month, it had reached 5.35 per cent, its highest level since 2002.
