FRANKFURT: Europe’s equity benchmark broke through the 600 level for the first time on Monday, as US strikes on Venezuela heightened geopolitical risk and drove investors into defence stocks. The post-holiday bounce reflects market sentiment that defence budgets will head structurally higher, even after a recent dip in the sector, fuelled by ceasefire speculation between Russia and Ukraine.
Europe’s STOXX 600 ended above 600 points for the first time, up 0.9 percent at a record 601.76. The defence index jumped 4.1 percent to its highest level in nearly three months.
Danni Hewson, head of financial analysis at AJ Bell, referring to the 600-point milestone said: “It demonstrates that, despite the geopolitical instability around the globe, investors feel confident in the way markets are progressing.”
Some heavyweight defensives, including Nestle and Unilever, slid nearly 3 percent each, curbing the day’s gains. The broader food and beverages sector fell 1.4 percent.
The European energy index gained 0.8 percent as oil prices jumped by about 1 percent, with traders assessing the possible impact on oil flows from the US capture of President Nicolas Maduro of Venezuela, home of the world’s biggest oil reserves.
Technology and basic resources were also up 3.7 percent and 2.3 percent respectively.
Germany’s stock benchmark also hit a record high, and was last up 1.3 percent as defence manufacturer Rheinmetall led the index with a 9.3 percent gain.
“Venezuelan oil supply is unlikely to move global energy markets meaningfully in the near term. Even under optimistic assumptions, it will take years to rehabilitate the country’s energy sector,” said Landon Derentz, vice president of energy and infrastructure at Atlantic Council Global Energy Center, a think tank.
Apart from continuing to monitor the situation in Venezuela, investors are focusing on central banks and watching incoming data for clues on how quickly rate cuts could be delivered.
Meanwhile, miners Glencore, Rio Tinto and Anglo American got a boost from higher copper prices.
Shares of ASML, the world’s biggest supplier of computer chip-making equipment, rose 6.8 percent. Analysts at brokerage Bernstein upgraded the stock to “outperform” from “market perform” and raised their price target on the stock to 1,300 euros from 800 euros.
Comments
Comments are closed for this article.