European Stocks Fall as Middle East Concerns Ease; L’Oreal Up | Mint – Mint

(Bloomberg) — European stocks halted a decline sparked by resurgent tensions in the Middle East, while L’Oréal SA rebounded after better-than-expected quarterly sales.

The Stoxx Europe 600 index was down 0.4% at 1:09 p.m. in London, after falling as much as 0.9%. Energy stocks fell the most, with oil having erased an earlier strong rise. L’Oréal shares rose 4.4% after the cosmetics maker’s like-for-like sales beat expectations, allaying concerns about a slowdown in the beauty market.

Israel launched a retaliatory strike against Iran less than a week after Tehran fired rockets and drones, according to two US officials, but Iranian media appeared to downplay the incident in the hours after the first reports. According to Iran’s official Nour News newspaper, an Israeli attempt to use drones in a “sabotage” operation against the country has failed.

“Markets, as they have done in recent months, are reacting very calmly and objectively to the real risk that an escalation in the Middle East could significantly affect the global economy,” said Roberto Scholtes, head of the strategy at Singular Bank. has not rebounded in recent days, and its rise in previous months is largely due to strong demand.

The Stoxx 600 Europe index is expected to see a third weekly decline for the first time since October, as geopolitical tensions add to concerns over the Federal Reserve keeping interest rates higher than expected.

“Movements in the stock and bond markets are driven by expectations of the Fed and need to be factored into the process of stock correction taking place this month after dramatic rallies,” Scholtes said.

Among other individual moves on Friday, shares of Royal Unibrew A/S rose 16% after the brewer reported preliminary net profit and EBIT above consensus expectations.

Here’s what investors and analysts are saying:

Marija Veitmane, senior multi-asset strategist at State Street Global Markets

“For the moment, the market is not in panic mode. Markets, along with Iran and Israel, are downplaying the attacks. Stock futures are recovering and oil has given up all previous gains. Of course, we can’t ignore the attacks, but it seems that stronger inflation and growth data and a reassessment of Fed cuts are dominating the market’s attention. That said, more conservative positioning is consistent with our current reading of the market. »

Ekaterina Iliouchenko, Union Investment Privatfonds GmbH

“The conflict in the Middle East, if it does not escalate on the second front, will not be a great tragedy for the local population, but it will probably have a temporary impact. But there remains the memory of the Russia-Ukraine affair between 2014 and 2022; we used to have volatility from time to time during those years, and there were even a few times where we were very close to escalation, but nothing happened during that time. period, until after 2022. It is therefore difficult to predict and predict this type of development. geopolitical risk.

Benjamin Toms, analyst at RBC Capital Markets

“A potential impact on energy costs that could keep inflation high for longer, which could ultimately mean central banks delay cutting rates. This creates macroeconomic uncertainty which means companies could postpone investment decisions. »

“Volatility will help some parts of investment banks’ trading revenues, but will be a hindrance to other revenue streams in the capital markets.”

Bernd Meyer, Chief Investment Strategist and Head of Multi Asset at Berenberg

“The Israeli counterattack appears to be moderate and not designed to escalate. This gives hope that further escalation can be avoided. A negative market reaction should therefore be limited. »

“Given persistent inflation, geopolitical risks and possible sanctions, we continue to see good opportunities in commodities and commodity-related stocks, especially as investors still appear underinvested in this domain.”

Susana Cruz, strategist at Liberum

“Political uncertainty likely means markets will be more volatile than they have been over the past six months. The dollar will probably rise, because in addition to tensions in the Middle East, we now know that the Fed will not be able to lower its interest rates anytime soon while the ECB and the BoE will do so to stimulate activity. This limits the rise in stocks for the moment, particularly for companies operating on domestic markets in Europe. »

Christoph Witzke, Chief Investment Officer and Head of Portfolio Management at Deka Investment

“For me, developments in the Middle East remain subject to increased uncertainty. As a fund manager, I pay particular attention to the reaction of the price of oil and the US dollar. For now, the movement has remained discreet. If this remains the case, we are currently more likely to see a rally in stocks in the coming days/weeks than the emergence of a new downtrend. Indeed, the long-term framework remains quite constructive.

Ipek Ozkardeskaya, senior analyst at Swissquote Group Holding

“As the geopolitical landscape remains tense in the region, there is a risk that tensions could spiral out of control. In this context, oil prices should remain supported, with the risk of a further increase. Rising oil prices are expected to further fuel global inflationary pressures and threaten rate cut plans by major central banks. In contrast, a hawkish turn by global central banks would hit risk appetite, reverse the reflation trend (which has been supported by subdued central bank expectations) and weigh on global stock indices and prices. raw material. »

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–With help from Sagarika Jaisinghani, Michael Msika, Tugce Ozsoy, Sonja Wind and Ellie Harmsworth.

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