The Euronext stock exchange in Paris
by Diana Mandia
European stock markets closed a hesitant session slightly higher on Monday, with investors digesting the impact on their rate cut bets of a resilient American labor market.
Caution also remains necessary before the publication of American inflation figures and in a tense geopolitical context which is pushing up the price of oil.
In Paris, the CAC 40 gained 0.46% to 7,576.02 points. In London, the FTSE 100 gained 0.28% and in Frankfurt, the Dax, the only exception among the main indices, fell by 0.14%.
The EuroStoxx 50 index ended up 0.27%, the FTSEurofirst 300 gained 0.30% and the Stoxx 600 gained 0.17%.
The U.S. Labor Department’s report released Friday, which showed the economy created more jobs than expected in September, continued to set the tone on Monday.
While the figures dispelled fears of a deterioration in the US economy, they also led traders to abandon hopes of a further 50 basis point rate cut by the Federal Reserve (Fed) in November, as a healthy labor market suggests that a 25-point drop will be enough.
That has pushed up sovereign bond yields on both sides of the Atlantic, hurting real estate, technology and utility providers and benefiting banks, which benefit from a higher rate environment.
In this context, the data on American inflation, expected on Thursday, will be particularly closely monitored, as will the speeches of the various monetary policy officials of the Fed who are due to speak this week.
In Europe, the markets have also almost entirely integrated a new reduction of 25 basis points from the European Central Bank (ECB) during the meeting on October 17, a scenario supported on Monday by François Villeroy de Galhau, the governor of the Banque de France, which deemed a drop in borrowing costs “very likely” in a context of weak economic growth and slowing inflationary pressures.
The central bank is particularly attentive to Germany, whose economy once again sent worrying signals on Monday. Data released earlier today showed that industrial orders fell much more than expected month-on-month in August, and Germany’s Economy Ministry now expects the country’s GDP to contract by 0.2%. in 2024, which would be the second consecutive year of contraction for Europe’s largest economy.
Geopolitically, the escalation of the conflict in the Middle East continues to worry investors, particularly because of the impact that rising oil prices could have on the trajectory of inflation.
VALUES
In Paris, luxury goods continued to benefit from the announcement of economic recovery measures from China, a key market for the sector. Kering, LVMH and Hermès ended with gains of 4.5% to 1.1%, among the best performances in the CAC 40.
Ubisoft lost 3.8% after saying it was taking note of recent press speculation regarding potential interests around the company. Rumors circulated Friday about discussions between the Guillemot family and the Chinese company Tencent 0700.HK.
Atos, which declared on Monday that it wanted to continue discussions on its strategic assets with the French state after having failed to reach an agreement on Bercy’s offer aimed at buying certain strategic assets of the Big data and security (BDS) activity of the group, dropped 0.65%.
The French reinsurer lost 3.8%, the American hurricane monitoring agency (NHS) having upgraded Hurricane Milton to category 4, which is expected to hit Florida in the coming hours.
Rubis, for its part, gained 3.4% after announcing the launch of a share buyback plan for an amount of 50 million euros.
Elsewhere in Europe, Cartier owner Richemont rose 2% after agreeing to sell its online fashion and accessories business Yoox Net-A-Porter (YNAP) to German luxury fashion platform Mytheresa.
A WALL STREET
At closing time in Europe, the Dow Jones fell by 0.41%, the Standard & Poor’s 500 by 0.30% and the Nasdaq Composite by 0.36%.
The electric automobile manufacturer Lucid, whose third quarter deliveries exceeded expectations on Monday, gained 1.3%.
The American cosmetics group Coty
TODAY’S INDICATORS
In the euro zone, investor morale saw an unexpected rise in October, after three consecutive months of decline, even as dissatisfaction with the current situation reached its lowest level of the year, according to a published survey Monday.
Retail sales, for their part, increased by 0.2% over one month in August, in line with expectations, according to data published Monday by Eurostat.
CHANGES
The dollar moved closer to its highest level in seven weeks on Monday, strengthened by good US employment data on Friday and the escalation of the conflict in the Middle East.
As the European stock markets close, it is rather stable (-0.02%) against a basket of reference currencies.
The euro lost 0.03% to 1.0973 dollars.
RATE
Euro zone government bond yields continued to rise on Monday as US labor market data released on Friday dashed traders’ hopes for another aggressive cut in borrowing costs from the Fed in november.
The ten-year German Bund yield rose 3.6 basis points to 2.2500% and its two-year counterpart gained 3.1 basis points to 2.2390%.
In the United States, Treasury yields are also increasing, with that of the 10-year bond having also reached 4% for the first time in two months. It is up 3.9 basis points at 4.0197% at the close in Europe, while that of the two-year bond is up 5.1 basis points at 3.9827%.
OIL
Oil prices continued their rally on Monday, with Brent surging above $80 after recording the biggest weekly rise since early 2023, on fears of a wider conflict in the Middle East and disruption to exports from the main oil producing region.
Brent rose 3.28% to $80.61 per barrel and American light crude (West Texas Intermediate, WTI) rose 3.47% to $76.96.
(Written by Diana Mandiá)
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