European stocks remained largely unchanged as easing tensions in the Middle East brought some optimism, though declining oil prices exerted pressure on the energy sector. By mid-morning in London, the Stoxx Europe 600 Index had flattened out, trimming early gains due to a pullback in energy stocks, while airlines benefitted from lower fuel costs.
Oil prices dropped over 6% following a statement from Iran indicating that its oil industry operations remained unaffected by Israel’s recent attacks on military sites. This response from Israel, considered limited, fostered hope among market watchers that the situation in the Middle East would not escalate further. Mohit Kumar, Jefferies’ chief strategist for Europe, pointed to this restrained response as a signal that the conflict may not intensify.
Throughout October, European equities are expected to experience a slight downturn, influenced by factors such as the upcoming UK budget and the approaching US presidential election, both of which contribute to a cautious trading environment. Sectors sensitive to China’s economic conditions, notably luxury and mining stocks, have been particularly impacted as investors gauge the likelihood of sustained recovery efforts by China to address its economic slowdown.
Despite these challenges, there have been some encouraging developments, with earnings exceeding expectations across both US and European markets, as reported by Barclays strategists. Kumar expressed a longer-term positive view on risk assets but mentioned that profit-taking was underway in anticipation of the elections. He also highlighted that any pullback in risk assets could serve as a buying opportunity.
Investors are preparing for a busy week of data releases, including economic activity figures from China, Eurozone and US growth reports, as well as a US payroll report, all of which are expected to shape market sentiment.
Among individual stocks, Royal Philips NV experienced its largest drop in 26 years after it adjusted its annual sales growth forecast downward due to weaker demand from China. Computacenter Plc also dipped, falling 2.1% following a warning from the company about a softer-than-expected end to the third quarter and a likely slight drop in adjusted pretax profits for the year. Conversely, Sonova Holding AG saw notable gains as Costco announced the reintroduction of some of its hearing aids into their product selection, boosting the stock’s performance on the broader benchmark.
Although the European market faces near-term uncertainties, easing geopolitical pressures and some promising earnings reports have balanced investor sentiment, while upcoming economic data may further clarify market trajectories.
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