European stock markets experienced a rebound on Thursday, but they continued to show negative trends for the week due to escalating geopolitical tensions that impacted investor sentiment.
Stock market behavior diverged across the Atlantic this week. While European equities faced downward pressure from rising geopolitical risks, Wall Street maintained its upward momentum, buoyed by strong quarterly earnings from Nvidia.
The intensifying conflict between Ukraine and Russia triggered a risk-off sentiment, escalating demand for safe-haven assets such as the US dollar and gold. In contrast, the euro fell against the dollar, reaching its lowest level in nearly a year. Bitcoin approached the $100,000 milestone, fueled by optimism surrounding Trump. Additionally, crude oil prices surged over 4% this week, positively impacting global energy stocks.
European Markets Overview
Most European indices closed the week on a down note, with the pan-European Stoxx 600 declining by 0.12%, Germany’s DAX losing 0.34%, and France’s CAC 40 falling by 0.77%. Conversely, the UK’s FTSE 100 posted a gain of 1.06% in the first part of the week, thanks to a rally in energy stocks fueled by the recent rebound in oil prices amid rising geopolitical tensions.
However, Thursday’s positive close in major benchmarks indicates that investors are reassessing geopolitical risks and the broader economic outlook, potentially leading to a more favorable weekly performance across Europe.
On Thursday, shares of major European corporations saw an uptick despite the overall negative weekly performance. ASML stocks rose by 2.4%, propelled by Nvidia’s strong earnings, which boosted confidence in the semiconductor sector. Meanwhile, SAP continued its ascent, gaining 1.86% for the day and 3.86% for the week. In contrast, the consumer sector faced pressure, with LVMH shares sliding 1.9%, L’Oréal dropping 2.3%, and Hermès retracting 2.3% this week.
On the flip side, defense stocks soared amid heightened tensions between Ukraine and Russia. Rheinmetall’s shares surged for the third consecutive week, reaching a new high as the German animation manufacturer projected €20 billion in sales by 2027, attributing this to increased defense spending in the EU and NATO.
Additionally, mining and energy stocks outperformed due to ascending commodity prices. Shares of Rio Tinto and Anglo American increased by 2-3% this week, while BP and Shell saw boosts of 1.5% and TotalEnergies rose by over 1%.
Focusing on economic indicators, the eurozone’s inflation for October remained stable at 2% year-on-year, aligning with the European Central Bank’s (ECB) target. However, core inflation persisted at a sticky 2.7%. Market attention now shifts to upcoming manufacturing and service PMIs, which could further sway market sentiment on Friday.
In the UK, inflation rose to 2.3% in October, up from 1.7% the previous month, potentially supporting the Bank of England’s (BOE) cautious approach toward interest rate adjustments.
US Market Insights
U.S. stock markets are poised for weekly gains, driven by a strong economic outlook, impressive corporate earnings, and continued optimism about Trump’s presidency. The Dow Jones Industrial Average climbed 1%, the S&P 500 rose 1.3%, and the Nasdaq Composite increased by 1.6% this week.
Sector-specific performance revealed that interest rate-sensitive sectors like Utilities and Real Estate excelled, while growth stocks, including Technology and Consumer Discretionary, underperformed against broader market advancements. The energy sector also benefited from rising oil and gas prices, showcasing a shift in investment preferences from tech stocks toward sectors that react favorably to lower interest rates and economic strength.
Nvidia, the leader in artificial intelligence, posted robust quarterly earnings, with a staggering 94% revenue growth year-on-year. However, the company’s moderate outlook for the fourth quarter initially saw its stock slide 2% before rebounding. The Magnificent Seven stocks faced mixed results this week, with Tesla shares up by 6% following news that the Trump Administration may relax autonomous vehicle regulations.
The US dollar index traded above 107 for the first time since October 2023, benefiting from risk-averse sentiment alongside the ongoing rally in dollar-denominated assets. This dollar strength is expected to persist amidst the Fed’s hawkish posture and rising US government bond yields.
Asia-Pacific Market Summary
Across the Asia-Pacific, major stock indices showed mixed performance this week amid varying economic conditions. The ASX 200 hit a record high, appreciating by 1.4%, driven by a broad rally in energy and utilities sectors. This trend echoed Wall Street’s momentum, despite the Reserve Bank of Australia’s continued hawkish stance.
Conversely, Chinese stock markets remained under pressure, with the Hang Seng Index declining by 0.5% and the China A50 falling by 0.64%. The Chinese Yuan continued to weaken against the US dollar, with the USD/CNH trading near a four-month peak. Japan’s Nikkei 225 fell over 1% this week due to the Yen’s resurgence.
Photo credit & article inspired by: Euronews
