Europe close: Stocks fall for second day as oil prices surge
European stocks pared losses but still ended firmly in the red as macro uncertainty and ongoing conflict in the Middle East continued to weigh heavily on sentiment, as oil prices surged.
The Stoxx 600 finished 0.2% lower at 520.40, trimming losses after falling by as much as 0.8% earlier on. Nevertheless, the index fell for the second straight day after hitting a four-week high of 524.99 on Friday – its highest level since reaching an all-time closing high of 528.08 on 27 September.
Brent crude was up 1.95% at $75.74 a barrel by the close in Europe as markets priced in China’s recent stimulus measures and concerns about oil supply disruptions in Iran amid ongoing fighting with Israel.
“Geopolitical tensions remain at a boil and traders are awaiting more information on Israel's targets for a strike against Iran, keeping a floor on prices,” said Daniel Ghali, senior commodity strategist at TD Securities.
Investors were also keeping a close eye on comments from European Central Bank president Christine Lagarde, who said that the pace of upcoming interest-rate cuts was still undecided, after easing monetary policy in the three of the past four meetings. “The direction of travel, clear,” she said in an interview with Bloomberg TV. “Pace, to be determined.”
Comments from the Federal Reserve were also in focus after several policymakers called for less aggressive rate cuts following the bumper 0.5 percentage point cut last month.
In other news, the IMF on Tuesday upgraded its projections for UK economic growth for 2024 to 1.1%, up from an earlier forecast of 0.7%. However, Germany’s economy is expected to flatline this year, as the IMF downgraded its projection by 0.2 percentage points to 0%.
Economic data was thin on the ground on Tuesday, with the only major release being UK borrowing figures. UK government borrowing rose £2.1bn last month to £16.1bn, marking the third-highest September figure since monthly records began in January 1993, according to data from the Office for National Statistics. The figure was higher than the Office for Budget Responsibility’s forecast of £15.1bn but below the consensus forecast of £17.4bn.
SAP and Saab outperform
SAP gained 2% after the German software giant upped its full-year sales and profit targets after cloud revenue surged 27% in the third quarter. The company guided to an annual operating profit of €8bn, up €200m on previous guidance.
Swedish aerospace and defence group Saab AB jumped 8% after saying that full-year sales would hit the top end of guidance after third-quarter bookings surged 41%. Chief executive Micael Johansson said the company is seeing "increasing demand as European nations need to replenish their defence stocks".
HSBC rose 1% after announcing the appointment of its new chief financial officer, as well as a number of key structural changes aimed at enhancing strategic execution and leadership. HSBC said it would streamline its operations by reorganising into four core business units – Hong Kong, UK, Corporate and Institutional Banking, and International Wealth and Premier Banking – designed to reduce duplication and improve agility.
Swiss tech firm Logitech dropped 6% as investors were underwhelmed with the company raising its full-year guidance for the current year, after the company reported a worse-than-expected 6% increase in second-quarter sales.
Hotels group IHG gained nearly 2% despite reporting a slowdown in RevPAR growth in its third quarter as conditions in China worsened. RevPAR was up just 1.5% in the three months to September, down from 3.2% in the second quarter, missing the 2.1% consensus estimate.