European stocks remain steady, as gains in autos and chemicals offset the uncertainty surrounding Iran war
European shares closed little changed Wednesday, near the record levels set before the Iran War began. Gains in automobile and chemical stocks helped offset concerns about a conflict that could have a negative impact on the energy markets. The pan-European STOXX 600 closed at 628.18 after trading modestly higher in the session. It is about 1% lower than its previous high before the conflict started in late February. Brent crude fell 3.2% in price, which provided some relief to the markets, as investors remained focused on Washington's and Tehran's?mixed signals. Iran's State TV reported that it had obtained an unofficial draft of a framework for a first?understanding to end the conflict between the United States, Iran and other countries. The report said that Tehran would be required to return shipments through the Strait of Hormuz within one month to the pre-war level. However, the White House rejected the report.
Iran accused the U.S. on Tuesday of "violating" a ceasefire. This raised new doubts about the sustainability of peace efforts.
"Europe is more vulnerable than the U.S. Luca Bindelli is the head of investment strategy for Lombard Odier. He said that "the economic transmission channel" of a conflict was clearly related to energy.
Bindelli stated that "if we reached a deal some of the concerns brewing around Europe could be dispelled."
The earnings picture would not necessarily improve in the immediate aftermath. However, from the perspective of sentiment and multiples, Europe could recover.
Analysts say that the rise in energy costs is a major reason why European stocks have underperformed Wall Street so far this year. On Wednesday, the European Central Bank warned that trade tensions and war could harm euro zone growth and increase borrowing costs. It also said it might strain some member state's public finances. Data showed that Europe's registrations of cars?rose by 7% in April. This was largely due to demand for electric vehicles. Chemicals rose more than 1.3%. AkzoNobel, the Dulux paint manufacturer, saw a 19.5% increase after it rejected an offer of 73 euros ($85.50) per share by Nippon Paint & Sherwin-Williams.
Naturgy dropped 4% as a result of?private equity company CVC Capital Partners selling its entire 13.8% share in the Spanish energy firm at a discount. Nordex fell 3% while Orsted, Vestas, and Vestas all lost between 3.1% and 7.4%. Polish video game developer, CD?Projekt, dropped 7.5% when it announced that it would release the third story expansion to its flagship game "The Witcher 3 Wild Hunt" in 2027 instead of this year as expected by the market. ($1 = $0.86 euros) Reporting by Johann M Cherian, Bengaluru. Editing by Mrigank Dahniwala and Rashmi aich.
(source: Reuters)
