It’s a new day but European stocks are opening broadly lower again, with the selling notably heavier in Italy:
- Eurostoxx -0.6%
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Germany DAX -0.4%
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France CAC 40 -0.6%
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UK FTSE 100 -0.6%
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Spain IBEX -0.5%
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Italy FTSE MIB -1.2%
The overall backdrop remains firmly risk-off at this juncture. Brent crude is trading above $107 as renewed attacks on Saudi energy infrastructure this week raise fresh supply concerns, while 10-year Treasury yields have pushed above 5.02% to their highest since 2007.
The combination of the two is fueling inflation fears just a day before the Fed decides on its next monetary policy step, with markets heavily pricing a 25 bps rate hike.
Italy’s benchmark index is leading losses after a rough selloff yesterday, with banking stocks in particular coming under pressure again. The selloff yesterday also involved technology stocks (Prysmian and STMicroelectronics) but the losses today in that space is more contained for the FTSE MIB.
That being said, tech shares remain cautious and more on the defensive still after the broader selloff in AI-linked stocks yesterday. Calls from senior AI industry figures to slow development have weighed particularly heavily on semiconductor and infrastructure names to start the week. And that is still weighing on the overall mood for the most part.
US futures are also pointing lower, with S&P 500 futures down around 0.4% after Wall Street’s tech-led decline yesterday. Nasdaq futures are currently down 0.3% on the day.
The key problem for equities at the moment is not just one thing going wrong. But it is a combination of oil above $100, Treasury yields above 5%, a more hawkish Fed setup, and lingering AI uncertainty.
And until at least one of those pressures eases, equities will likely struggle to gain traction for any rebound/relief rally.
This article was written by Justin Low at investinglive.com.