The Stoxx 600 dropped 1.8% last week, with global stocks also starting October on shaky footing as escalating geopolitical tensions pushed oil prices higher. On Monday, West Texas Intermediate’s November-dated futures and Brent’s December-dated futures hit their highest levels since August 30.
“The market focus last week shifted to geopolitics with escalation between Israel and Iran. We have seen room for more geopolitical risk premium to be priced in across different asset classes, especially via energy markets... underpriced geopolitical risk premium suggests caution, in our view,” analysts at BNP Paribas said in a note.
The British pound was 0.3% lower against the U.S. dollar at $1.3077, continuing to slide following the sharp market reaction last week to comments from Bank of England Governor Andrew Bailey that were perceived as surprisingly dovish.
Looking at individual stocks, London-listed shares of Rio Tinto closed slightly above the flatline after the miner confirmed it was in talks to buy lithium producer Arcadium Lithium.
Shares of Italgas closed 0.56% higher after Italy’s biggest gas distributor said it expected double-digit growth in net income and core profit as part of a new plan, Reuters reported. This comes after it signed a 5.3 billion euro ($5.8 billion) deal to acquire rival 2i Rete Gas on Saturday.
On the data front in Europe Monday, the U.K.’s Halifax House Price Index showed British house prices rose in September at the fastest annual pace since November 2022.
Other data showed euro zone retail sales edged up in August, up 0.2% from the previous month and in line with a Reuters poll. Jack Allen-Reynolds, deputy chief euro zone economist at Capital Economics noted Monday that “the available data suggest that euro-zone household spending was subdued in the third quarter and may well have fallen.”
Global stocks received a boost at the end of last week from the September U.S. jobs report, which exceeded expectations. Nonfarm payrolls data showed the U.S. added 254,000 jobs in September, ahead of the 150,000 estimated by economists polled by Dow Jones, lending support to the idea that the Federal Reserve may pull off a “soft landing” for the economy.
Asia-Pacific markets mostly climbed overnight, led by Japan’s Nikkei 225 rising almost 2% as investors look ahead to a week of central bank decisions from around the region, including from the Bank of Korea, the Reserve Bank of New Zealand and the Reserve Bank of India.
U.S. stocks were lower Monday morning despite the jobs report, as an uptick in U.S. Treasury yields and higher oil prices weighed.
Key releases for the remainder of the week include Fed minutes and German trade on Wednesday, U.S. inflation on Thursday and U.K. economic growth on Friday.