European equities are off to a strong start to the week, with the major indices broadly higher:
- Eurostoxx +0.9%
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Germany DAX +0.8%
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France CAC 40 +0.6%
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UK FTSE +0.4%
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Spain IBEX +0.7%
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Italy FTSE MIB +0.7%
The main tailwind driving the move is arguably the pullback in oil prices. Brent is down roughly 2% around $102 as markets take some comfort from signs that Saudi supply flows could recover and crude exports from the Gulf are holding up better than feared. That is helping to ease some of the anxiety from inflation pressures and the bond market that dominated trading last week.
The move is partly a rebound from Friday’s heavy sell-off, where major indices in Europe dropped by over 1%. Autos were particularly weak then, led by Volkswagen after its outlook cut, while European banks also came under pressure from the renewed rise in bond yields.
The bond market is keeping calmer for now, with 10-year Treasury yields sitting at 4.97% still. Meanwhile, 10-year yields in Germany are also lower at 3.47% – down from the Friday level of around 3.51%.
Besides that, the broader risk sentiment is helping too. Asian tech shares have moved higher to start the week and we’re also seeing a broader rebound in US futures. S&P 500 futures are up around 0.5% and Nasdaq futures up 0.7%, reinforcing the positive tone heading into Europe.
Overall, it points to more of a relief bounce/rally once again. The combination of lower oil prices, slightly calmer yields and positive US futures is giving equities room to rebound, although the broader rates backdrop remains a constraint after the Fed’s hawkish shift.
This article was written by Justin Low at investinglive.com.