Experts working on their screens in NYSE Euronext’s cash market operations room in Paris
by Claude Chendjou
European stock markets closed sharply lower amid significant volatility, bond market tensions, soaring energy prices, and warnings from major central banks. The ongoing conflict in the Middle East has now spread to energy infrastructure.
In Paris, the CAC 40 fell by 2.03% to 7,807.87 points. The UK’s FTSE dropped by 2.35% and Germany’s DAX by 2.82%.
The EuroStoxx 50 index lost 2.14%, the FTSEurofirst 300 by 2.39%, and the Stoxx 600 by 2.39% as well.
At the European close, the Dow Jones was down 0.89%, the S&P 500 by 0.74%, and the Nasdaq by 0.90% amid fears of a resurgence in inflation weighing on investor sentiment.
All three major US stock indices are now trading below their 200-day moving average, indicating a long-term downward trend.
Iranian air strikes since Wednesday caused significant damage to the world’s largest gas complex in Qatar and a Saudi Aramco-ExxonMobil refinery in Saudi Arabia. The UAE closed gas installations, and two Kuwaiti refineries are on fire.
Treasury Secretary Scott Bessent’s remarks that the US might soon lift sanctions on Iranian oil shipments to boost global supply and lower prices did little to reassure markets.
The Middle East conflict escalated, causing gas and oil prices to surge, with EuroStoxx 50 volatility index rising over 10% above 30 points.
In this context, central banks of the eurozone, US, Canada, Japan, UK, Sweden, and Switzerland issued warnings about growth and inflation risks in their respective monetary policy statements on Wednesday and Thursday.
European Stocks
Energetic companies Equinor (+11.03%), Var Energi (+12.69%), Aker BP (+6.97%) led the Stoxx 600 as crude oil prices surged.
Accor plunged by 5.97% after Grizzly Research announced a short position on the hotel group’s stock.
Beneteau dropped by 1.81% after its results and forecasts, while Deezer surged by 7.27% after reporting its first annual profit on Wednesday.
Key Indicators
Weekly jobless claims in the US decreased to 205,000, down from 213,000 in the previous week, according to the Labor Department.
Activity conditions in the Philadelphia region improved in March, contrary to expectations, as per the monthly survey by the local Federal Reserve branch.
UK’s annual wage growth, excluding bonuses, stood at 3.8% in the quarter ending in January, lower than anticipated, reported the Office for National Statistics.
Exchange Rates
The dollar dropped by 0.52% against a basket of international currencies but remained near its 10-month high due to the Iran conflict and oil price hikes, leading investors to seek refuge in US assets.
The euro gained 0.81% at 1.1543 dollars, while the pound sterling traded at 1.3378 dollars, up by 0.94% after the unanimous decision by the ECB and BOE to maintain interest rates amid Middle East war-linked inflation risks.
Traders now estimate over 60% probability of a ECB rate hike by April, with discussions on raising borrowing costs in Frankfurt also considered in April.
Bonds
The 10-year German Bund yield rose by 1.4 basis points to 2.9553%, and the two-year yield jumped by 12.1 bps to 2.5667%. The 10-year US Treasury yield increased by around three bps to 4.2866%, while the two-year climbed by 12.8 bps to 3.8706%.
The bond market tension follows caution from the Bank of England and the European Central Bank amid the Middle East war context.
Energy
Brent crude oil surpassed $119 per barrel on Thursday after Iran attacked energy facilities across the Middle East in response to the Israeli attack on its South Pars gas field, marking a major escalation in the conflict.
By 17:00 GMT, Brent rose by 2.49% to $110.09 per barrel, and West Texas Intermediate (WTI) crude by 1.63% to $97.89. The Dutch TTF hub gas price briefly hit 74 euros/MWh, its highest level since January 2023.
Upcoming on Friday:
(Reporting by Claude Chendjou, Editing by Benoit Van Overstraeten)
