European stock markets declined on Monday, except for London’s FTSE 100, as investors await the U.S. presidential election. The CAC 40 and DAX indices fell, while energy stocks rose amid higher oil prices. Attention is shifting to the election’s potential impact on European markets, with analysts predicting varied outcomes based on the candidates. Wall Street showed mixed results, and economic indicators revealed improved Eurozone investor sentiment alongside fluctuating currency values and bond yields.
European Markets Close in the Red Ahead of U.S. Elections
On Monday, European stock markets experienced a downturn, with the exception of the British FTSE 100, as the technology sector faced losses that were slightly mitigated by gains in natural resource stocks. Investors are holding their breath as they await the outcome of the upcoming U.S. presidential election.
The CAC 40 index in Paris dropped by 0.5%, settling at 7,371.71 points, while Frankfurt’s DAX index fell by 0.47%. In contrast, London’s FTSE 100 managed to edge up by 0.09%.
The EuroStoxx 50 index decreased by 0.42%, the FTSEurofirst 300 slipped by 0.29%, and the Stoxx 600 recorded a loss of 0.26%.
Focus Shifts to the U.S. Presidential Race
Attention is now squarely on the U.S. presidential election scheduled for November 5, where a close contest is anticipated between incumbent Vice President Kamala Harris and former President Donald Trump. Financial analysts, such as Sebastiano Chiodino from Generali Asset Management, suggest that a Trump victory could lead to underperformance in European markets compared to their U.S. counterparts. Conversely, a win for Harris may signify continuity, potentially allowing European stocks to align more closely with U.S. performance.
Investors are also gearing up for the Federal Reserve meeting later this week, which may coincide with the uncertainty surrounding the election results, should vote counting take longer than expected.
Sector Highlights: Energy Gains, Technology Struggles
The energy sector saw a rise of 0.35%, largely due to increasing oil prices following OPEC+ nations’ decision to postpone their planned production increase by a month. Meanwhile, the technology sector faced a setback, declining by 1.06%, spurred by Morgan Stanley’s downgrade of STMicroelectronics from ‘equal weight’ to ‘underweight,’ which caused the stock to drop by 3%.
In London, Burberry shares surged by 4.8% amid reports of interest from Italian competitor Moncler, which saw a decline of 2.1%. On the other hand, Schneider Electric’s stock fell by 2.33% after the ousting of CEO Peter Herweck due to strategic differences with the board.
Swedish company SBB experienced a steep drop of 22.8% after a local financial publication urged investors to divest from the heavily indebted real estate firm.
Wall Street’s Mixed Response
Across the Atlantic, Wall Street exhibited caution as traders reacted to the impending presidential election, resulting in mixed index performances. The Dow Jones Industrial Average fell by 0.46%, while the S&P 500 remained stable, and the Nasdaq Composite gained a slight 0.16%.
Tesla managed to recover some of its early losses after a nearly 3% drop, with the latest data revealing a 5.3% year-on-year decrease in electric vehicle sales in China. Nvidia saw a rise of 2.69% following news that it would replace Intel in the Dow Jones Industrial Average starting November 8.
Economic Indicators and Currency Movements
In economic news, Eurozone investor sentiment improved for a second consecutive month in November, albeit slightly below expectations. The manufacturing sector showed signs of stabilization in October, although activity has contracted for 28 months, with Germany’s sector showing some resilience while France’s continued to decline.
On the currency front, the dollar weakened by 0.46% against a basket of currencies as investors reassessed their strategies ahead of the election. The euro appreciated by 0.51%, reaching 1.0889 dollars.
Market Outlook and Oil Prices
In the bond market, U.S. treasury yields fell significantly, reflecting shifting investor sentiment. The yield on ten-year Treasuries dropped by 5.8 basis points to 4.3049%, while the two-year yield decreased by 4.3 basis points to 4.1599%. The ten-year German Bund yield fell by one basis point to 2.394%, with the two-year yield rising by 1.2 basis points to 2.291%.
Oil prices rose as OPEC+ countries delayed their production increase, with Brent crude increasing by 2.2% to $74.71 per barrel, and West Texas Intermediate (WTI) climbing by 2.36% to $71.13.
Looking ahead