EU stock markets rise as oil prices and bond yields fall. Focus on central banks
Brazilian assets are expected to fall following Lula’s victory. All eyes will be on US tech companies’ quarterly results in the coming days
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(Il Sole 24 Ore Radiocor) - Falling government bond yields and oil prices are bolstering European share markets, which are seeking to regain ground following last week’s weakness and are awaiting decisions from central banks. The technology sector remains under pressure, whilst investors await the publication of quarterly results from Microsoft, Alphabet and Amazon in the coming days to assess whether share price movements reflect the sector’s growth prospects. The FTSE MIB on the Milan Stock Exchange is gaining ground in line with other major European indices. Among the leading Milanese stocks, Avio , Stellantis and Ferrari . Weak, on the other hand, were Recordati Ord and oil stocks.
On the macroeconomic front, monetary policy will take centre stage this week. On Wednesday, the Federal Reserve will hold its meeting, with traders – according to CME FedWatch data – more than 90 per cent of whom are betting on the status quo being maintained, followed by a 25-basis-point rate rise at the next meeting in December. On Thursday, it will be the ECB’s turn, with the consensus again pointing to interest rates being kept at current levels, whilst on Friday it will be the Bank of Japan’s turn.
Brazilian assets expected to fall following Lula’s victory
All eyes are on Brazil, where markets are expected to fall sharply following Inacio Lula’s unexpected victory in the presidential run-off and his rival Flavio Bolsonaro’s refusal to accept the result. An ETF listed in Tokyo and linked to Brazilian shares is down 16 per cent, whilst the real is under pressure on the foreign exchange market.
Spread down slightly to 120 points
In the bond market, there were minor fluctuations in the yields on Eurozone government bonds. The yield on the 10-year BTp, maturing on 1 July 2036, edged down slightly to 4.56 per cent from 4.57 per cent at Friday’s close, whilst remaining near its highest levels since autumn 2023. The spread narrowed to 120 basis points from 123 at Friday’s close. Attention remains firmly focused on French OATs, which have returned to just below 5 per cent for the 10-year maturity.
Euro/dollar trade range-bound, oil prices down
In the currency markets, the euro is trading at 1.119 dollars (unchanged from 1.119 at Friday’s close) and 175.62 yen (unchanged from 175.62). The dollar-yen exchange rate stands at 156.83 (unchanged from 156.83). On the energy front, oil prices are falling following a likely technical correction, after Brent crude closed last week at its highest level since April this year. Consequently, Brent is down 1.47 per cent at $115 per barrel and WTI is trading at $101.3 (-1.9 per cent). Gas prices continue to rise, reaching 96.3 euros per megawatt-hour (+2.6 per cent).
