EU stock markets stage a recovery as expectations of a Fed rate rise cool. Cucinelli springs into action

(Il Sole 24 Ore Radiocor)- European stock markets are attempting a recovery in the final trading session of the week, following a resurgence in buying on Wall Street and in Asia. The markets are being driven primarily by statements from Kevin Warsh, a Federal Reserve official, who argued that investment in artificial intelligence represents a significant benefit for the US economy. Meanwhile, investors are scaling back their bets on an interest rate rise after Warsh refrained from endorsing the need for a more restrictive monetary policy, despite this week’s inflation figures coming in higher than expected. “I don’t want to get ahead of myself. I don’t think it’s appropriate to say what I might do at future meetings,” said the Fed chairman. Following his speech, traders have reduced the probability of a Fed rate rise by the end of the month to 15 per cent, down from over 25 per cent on Thursday. Thus the CAC 40 in Paris, the DAX 40 in Frankfurt and the IBEX 35 in Madrid are trading in positive territory. The FTSE MIB in Milan is also up.

Turning to the equity market, Brunello Cucinelli is leading the way on the Milan main index following yesterday’s results. All eyes are also on Unicredit, after receiving the ECB’s green light to take control of Commerzbank. In general, the entire banking sector remains under scrutiny, caught between the economic uncertainty and the government’s demand that credit institutions, together with insurance companies, contribute 5 billion to the budget in 2027 and nearly 11 billion over the three-year period. The utilities sector is in the spotlight after the European Council called on the Commission ‘to update the assessment of all the impacts of ETS 2, in particular its design and safeguards’.

In the currency markets, the euro is recovering to 1.1232 dollars (1.1203 at the previous day’s close). The single currency is also trading at 177.27 yen (up from 176.9), whilst the dollar/yen cross is trading at around 157.83 yen (158). On the energy front, oil prices were down but were set to end the week higher, due to uncertainty over supplies from the Middle East and a larger-than-expected fall in US crude oil stocks. Brent is trading at around $105 per barrel and WTI at $97. Since the start of the week, Brent has gained 0.44 per cent, whilst WTI has jumped by 5.81 per cent. “Uncertainty in the Middle East and fears over the sustainability of oil flows through the Strait of Hormuz are causing the market to factor a significant risk premium into prices,” point out ING analysts. There was also a slight fall in gas prices, with Amsterdam trading at around 85 euros per megawatt-hour.

The downward trend in the spread between BTp and Bund bonds continues. The yield differential between the Italian 10-year benchmark bond and its German counterpart stands at 106 basis points, one point lower than the previous day’s close, when it had fallen by two points compared with Wednesday. The yield on the 10-year BTP also continues to fall, opening at 4.46 per cent, down from 4.47 per cent the previous day.

The Tokyo Stock Exchange closed higher. The Nikkei 225 index ended the session up 1.39 per cent at 65,324.29 points. Japanese share prices were buoyed by gains on Wall Street and a fall in US bond yields, whilst investors returned to favouring technology shares following the previous session’s correction.