European stock markets caught between record oil prices and interest rate fears; Milan brings up the rear (-0.8 per cent), Wall Street sees mixed trading
Wall Street falls as attention turns to Trump-Xi and bond yields. The market is betting on a further rise in Fed rates. Oil prices rise. The ECB says the outlook for the eurozone is ‘highly uncertain’, with inflation set to remain above 2 per cent until mid-2027
(Il Sole 24 Ore Radiocor) - Brent crude, which is nearing a record high of $107 a barrel, is once again causing concern on European stock markets, which view the surge in crude oil prices (and therefore inflation) as a precursor to possible interest rate rises by the Fed and the ECB. As has increasingly been the case recently, it is the tech sector that is bearing the brunt, dragging down almost all the indices across Europe.
Adding to the gloomy market sentiment, alongside the mutual accusations between the US and Iran, is the continued rise in government bond yields, whilst the much-anticipated meeting between Donald Trump and Xi appears to have ushered in a period of détente in relations between the two superpowers. The tycoon spoke of ‘great friendship’ and ‘more balanced trade relations’. So far, these words do not seem to have moved the markets. On the Milan Stock Exchange, the FTSE MIB index slipped towards the close and ended the day down 0.85 per cent (the worst performer in Europe).
On the macroeconomic front, in Germany, the Ifo index , which measures business confidence, rose to its highest level of the year, reaching 89.9 points compared with 88.8 points in August. The figure exceeded analysts’ expectations, who had anticipated a modest rise to 89.1 points.
Wall Street falls, Treasury yields near multi-year highs
Wall Street ended the session on a mixed note: the Dow Jones fell by 0.31 per cent to 51,349.89 points, whilst the Nasdaq rose by 0.01 per cent to 26,939.37. The S&P 500 was down slightly at 7,704.23 points (-0.02 per cent).
Treasury bond yields are close to multi-year highs, with market participants anticipating further rate rises by the Federal Reserve. The yield on 30-year Treasury bonds reached 5.446 per cent, a level not seen since June 2004, whilst the 10-year yield, which is linked to mortgage rates, jumped to 5.15 per cent, approaching levels not seen since July 2007. The yield on the 2-year bond remains unchanged, but earlier in the week it had hit its highest level of 2023. These movements coincided with a sharp rise in oil prices which – as mentioned – have fuelled expectations of further rate rises.
