Europe open: Stocks mixed as Israel conflict drives risk-off trading
European stocks opened mixed on Wednesday as markets struggled for direction in the wake of yet another rise in bond yields and ongoing conflict in Israel.
The Europe Stoxx 600 index was down 0.2% early on, with stocks in London falling 0.2%, Madrid down 0.1%, Paris flat, Frankfurt up 0.1% and Milan 0.2% higher.
Government bonds continue to be sold off with the 10-year US Treasury note yield rising a further 1.3 basis points (bp) to 4.847% early on, closing in on another 16-year high. The yield on a 10-year Germany Bund was up 2.7bp at 2.908% as it nears its multi-year high of 3.027% reached earlier this month – its highest since 2011.
Meanwhile, gold prices have rallied to a one-month high as investors seek safe havens amid an escalation of violence in Gaza after a hospital strike killed scores of people on Monday afternoon. Gold futures for December delivery were up 0.8% at $1,951 an ounce.
Victoria Scholar, head of investment at Interactive Investor, said the Israel-Hamas conflict is "spark[ing] nervousness among investors, boosting global appetite for safety assets like precious metals".
US president Joe Biden has touched down in Israel on the back of shuttle diplomatic efforts to de-escalate the crisis.
"The explosion at a hospital in Gaza has quietly influenced the financial markets' reaction to the Israel-Hamas conflict," said Stephen Innes, managing partner at SPI Asset Management.
"Initially, markets appeared to downplay the risk of a broader conflict. However, following the explosion, several key political leaders, including the Palestinian, Egyptian, and Jordanian leaders, cancelled meetings with US President Biden. While safe-haven flows still appear to be relatively subdued, the price of gold has tested the top of the recent range and oil prices initially inched higher. But for stock investors the optics are not great."
In economic data news on Wednesday, UK inflation held steady at 6.7% in September, despite expectations for a slight fall to 6.5%. Eurozone inflation stats are due out later this morning, while building permits and housing starts will be released in the US this afternoon.
In company news, Adidas shares were rising strongly after the sporting goods giant pointed to a full-year adjusted operating profit of €100m, compared with previous guidance of breakeven.
UK hospitality group Whitbread rose strongly in London after giving a confident outlook as it unveiled a £300m share buyback programme.
Also in London, housebuilder Barratt Developments reported a much slower start to the financial year with net private reservations falling 10% as a result of ongoing challenges prospective buyers are finding in securing mortgages. Secotr peers Taylor Wimpey and Berkeley also fell.