Decrease expected in Europe, the geopolitical risk is back

PARIS, May 8 (Reuters) – European stock markets are expected to open lower on Friday following clashes between the United States and Iran in the Strait of Hormuz, pushing oil prices above $100 a barrel.

According to initial indications, the Paris CAC 40 is set to drop 0.68% at the opening. The Frankfurt DAX could fall by 0.86%, while the London FTSE 100 is expected to lose 0.71%. The EuroStoxx 50 index is anticipated to decline by 0.76% and the Stoxx 600 to be down by 0.72%.

Geopolitical risks are likely to dominate trading in Europe again as the US and Iranian armies have accused each other of violating the one-month-old ceasefire. Additionally, the United Arab Emirates reported an Iranian missile and drone attack overnight, activating air defense systems.

However, sources mentioned progress in talks between Washington and Tehran towards ending hostilities and negotiating a broader agreement. US President Donald Trump stated that the ceasefire is still in effect, hinting at a negotiated resolution to the conflict, easing the rise in oil prices, with Brent crude currently around $101 a barrel.

“Despite ongoing hostilities and high oil prices, markets anticipate a limited duration of the conflict,” explained Marija Veitmane, head of equity research at State Street Markets.

On the economic front, the market is awaiting the official monthly US employment report after the ADP survey reported job gains in April above expectations. The Reuters consensus predicts 62,000 non-farm payroll jobs added in April, maintaining a stable unemployment rate at 4.3% with a 3.8% year-on-year wage growth.

In the US, Wall Street closed lower on Thursday, influenced by Intel and other chipmakers, amid uncertainty over a resolution to the US-Iran conflict. The Dow Jones fell 0.63%, the S&P 500 lost 0.38%, and the Nasdaq Composite dropped 0.13%.

In Asia, the Tokyo Nikkei retreated by 0.40% on Friday, weighed down by SoftBank’s decline and renewed US-Iran tensions. The MSCI index for Asia-Pacific excluding Japan fell by 0.8%.

Oil prices rose on Friday due to renewed US-Iran conflicts threatening a fragile ceasefire. Brent crude climbed by 1.05% to $101.11 a barrel, while WTI crude increased by 0.74% to $95.51.

Currency markets saw the dollar advancing against a basket of currencies due to rising US-Iran tensions, pushing the greenback to rebound from a two-month low. The euro edged up to $1.1735, while the British pound traded at $1.3572, heading for its first weekly loss since March.

Yen remained steady at 156.855 per dollar after Tokyo’s interventions contained strong sales. The US 10-year Treasury yield held at 4.38% on Friday after a 1.8 basis point decline on Thursday.

On the economic calendar for May 8: – Germany’s industrial production data for March – Germany’s trade data for March – US non-farm payroll report for April – US consumer sentiment data (Michigan)

(By Claude Chendjou, Edited by Augustin Turpin)