European markets have started the week on a negative note, primarily impacted by a flurry of profit warnings from leading automakers, overshadowing any positive effects from China’s economic stimulus initiatives.
The Stoxx Europe 600 index dropped by 0.7%, with the automotive sector experiencing significant declines following Stellantis NV’s announcement of a revised profit margin forecast. This came on the heels of another profit warning from Volkswagen AG, marking its second in just three months. In the luxury vehicle segment, Aston Martin Lagonda Global Holdings Plc forecasted that its 2024 earnings before interest, taxes, depreciation, and amortization (EBITDA) would fall short of last year’s figures.
Meanwhile, in stark contrast, the mood in the Chinese markets was markedly upbeat. The CSI 300 Index surged by as much as 9.1%, recording its largest increase since 2008, spurred by the government’s latest stimulus measures. While futures for the S&P 500 remained steady and U.S. Treasuries experienced a slight decline, European miners and luxury stocks benefitted from improved sentiment due to China’s economic strategies.
Marcus Poppe, co-head of European equities at DWS Investment, indicated that while the current sentiment is relatively optimistic due to China’s more aggressive economic policies, it may take time for European companies to report a rebound in performance. He advised caution, noting that immediate expectations for improvements in European equities might be unrealistic.
Investors are grappling with a multitude of risks, including potential economic slowdowns and increasing geopolitical tensions, particularly in the Middle East. Upcoming earnings reports slated for mid-October could also test the current rally in the market. As the week progresses, traders are keenly observing Eurozone inflation rates and manufacturing activity, along with the U.S. jobs report due on Friday, to gauge prospects for future Federal Reserve interest rate adjustments.
Political dynamics in Europe are also a concern. Following recent elections in Austria, traditional political factions are promising to prevent the far-right Freedom Party from assuming power after its historic electoral success.
The Middle East tension flared again after Israel’s actions led to the death of Hezbollah leader Hassan Nasrallah in Beirut, resulting in a rise in oil prices as the market speculates on Iran’s possible retaliation, coinciding with China’s market stimulus.
Key financial indicators to monitor this week include:
- Italy and Germany’s consumer price index (CPI) reports on Monday
- A speech by Federal Reserve Chair Jerome Powell at the National Association for Business Economics conference
- Central Bank of Europe President Christine Lagarde’s address at the EU Parliament on monetary policy
- Various Fed speakers throughout the week, including notable discussions on monetary policy
Some notable market movements include:
- The Stoxx Europe 600 index declining by 0.7%
- S&P 500 futures showing little movement
- Declining futures for the Nasdaq 100 by 0.1%
- A 1% drop in the MSCI Asia Pacific Index
- A slight decrease in the MSCI Emerging Markets Index
In currency trading:
- The Bloomberg Dollar Spot Index edged down by 0.1%
- The euro gained 0.3%, valued at $1.1198
- The Japanese yen and offshore yuan saw minor declines
Meanwhile, in cryptocurrency markets, Bitcoin fell by 2.7%, with Ether also decreasing by 1%.
In the bond market, yields on 10-year Treasuries rose slightly, while indices for European bonds also experienced a small increase.
On the commodities front, Brent crude oil rose by 0.9% to $72.60 per barrel, while spot gold prices dipped slightly.
This information has been compiled with the help of Bloomberg Automation, providing a comprehensive overview of current market dynamics and economic developments.