Stock markets: Europe down amid Middle East tensions and tech sector concerns. Oil and gas prices rise

(Il Sole 24 Ore Radiocor)- Losses are deepening on European stock markets are falling further after the United States launched a series of attacks against Iran, in response to actions attributed to Tehran against three ships in the Strait of Hormuz, and reimposed economic sanctions on Iranian oil. Compounding the decline in European markets were the remarks by US President Donald Trump, who, speaking from Ankara, said that Iran is a ‘lying and sick’ country and that the truce is now ‘over’. The White House occupant’s remarks sent oil prices soaring, with WTI and Brent both up by more than 5 per cent. Consequently, FTSE MIB is falling sharply; the CAC 40 and the DAX 40 are also down.

On a macro level, the NATO summit in Ankara draws to a close today, whilst investors’ attention is focused on the central banks. This evening, all eyes are on the publication of the minutes of the Fed’s June meetings, whilst on Thursday it is the ECB’s turn. These documents will offer valuable insights into individual members’ views on the future path of interest rates. The Governor of the Bank of Italy, Fabio Panetta, also commented on the matter, ruling out a massive rate hike across Europe. In particular, the governor noted that the risks of rising inflation continue to coexist with downside risks to growth, but the economy is not in the same situation as it was four years ago.

Investors’ focus remains on the tech sector (in Milan Stmicroelectronics remained largely unchanged) following the previous day’s sell-off, with the market beginning to question not so much the ongoing revolution linked to artificial intelligence, but rather the sustainability of the related business models. In the banking sector, Unicredit is under close scrutiny, having announced that the final take-up of the public offer launched on Commerzbank stand at 17.6%. The total stake held by the bank led by Andrea Orcel stands at 47.59% excluding cash derivatives. The energy sector is on the rise, driven by the increase in oil prices, with Eni and Saipem leading the gains. The latter is also benefiting from a new $2 billion contract in Indonesia. The defence sector is also worth keeping an eye on during the final day of the NATO summit in Ankara. In particular, all eyes are on Leonardo following the NATO contract awarded to the Italian company and Accenture, worth 200 million, for the Protected Business Network programme. Bringing up the rear are Avio and Fincantieri following the previous day’s gains.

Trump’s comments from Ankara have sent oil prices soaring. The Brent for August delivery has risen to around $77 a barrel, whilst the WTI is trading at around $74, up 5 per cent. There was a sharp rise in gas prices, which exceeded 49 euros per megawatt-hour in Amsterdam: after rising by almost 10%, they are now up 5 per cent. In the currency markets, the euro/dollar exchange rate is around 1.142; the dollar/yen stands at 162.13, whilst the euro/yen is at 185.2.

Eurozone government bond yields are rising following renewed tensions in the Middle East and a surge in oil and gas prices. The yield on the benchmark 10-year BTp, maturing on 1 July 2036, has risen to 3.83% from 3.76% at the previous day’s close. The Bund has returned above 3% for the first time since mid-June. The spread with the German 10-year bond has widened, returning to 80 basis points from 78 at the previous close. The 80-basis-point threshold in the BTp-Bund spread had not been reached since the first trading sessions of May.