FRANKFURT: European shares rebounded after an early wobble on Monday as oil prices eased, offering some relief to investors stung by the escalating conflict in the Middle East.
The pan-European STOXX 600 index closed 0.45 percent higher after falling as much as 0.45 percent earlier in the session. It snapped a three-day losing streak, thanks to gains of 1.48 percent and 1.2 percent in real estate and energy shares, respectively.
Investors have been highly sensitive to crude prices, which have soared since the US and Israeli strikes on Iran began more than two weeks ago. But the prices eased on Monday on hopes that more ships would be allowed to pass through the Strait of Hormuz, a vital artery for global oil shipments.
“The market seems to be counting on a US president who in the past has consistently shown a relatively low tolerance to adverse financial market movements,” said Richard de Chazal, macro analyst at William Blair.
“It is hoping he decides to end the conflict sooner… before too much domestic economic damage takes place ahead of the important midterms.”
Attention is also shifting to a busy slate of central bank meetings this week, where policymakers will have a chance to outline how recent events are shaping their outlook and give investors fresh clues on how to position.
“Given that the conflict is only two weeks old, policy will be on hold, and therefore the focus will be on updated economic forecasts from the Federal Reserve and from the European Central Bank,” said Jeremy Batstone-Carr, European strategist at Raymond James.
“More particularly, the market’s focus will be on the accompanying statement and the tenor of the press conferences held by (Fed Chair) Jerome Powell and (ECB) President Lagarde and (Bank of England Governor) Andrew Bailey.”
Investors have rapidly trimmed rate cut bets on fears that the oil supply shock could boost crude prices and push inflation higher, forcing central banks to delay easing.
Comments