Key Takeaways
- European shares reached a one-week high, boosted by lower oil prices and falling bond yields.
- The pan-European STOXX 600 rose 0.61% to its highest level since October 6.
- Luxury stocks, led by LVMH, fell 1% due to weaker-than-expected third-quarter sales.
European shares saw a significant rise on Tuesday, reaching a one-week high as oil prices fell and bond yields decreased, boosting investor sentiment. The pan-European STOXX 600 climbed 0.61% to 639.54 points by 0849 GMT, its highest level since October 6.
London’s FTSE 100 was the biggest gainer among regional indexes, rising about 0.8%, supported by strong performance in the financial sector. This upward trend was attributed to the resilience of corporate earnings, despite concerns over rising borrowing costs.
The chemicals sector led the gains, increasing by 1.7%, while heavyweight banks also advanced 1%. Lauren Hyslop, an investment manager at Mattioli Woods, explained, 'Banks generally like higher rates, higher yields. European shares rise on lower oil prices, bank strength ahead of earnings They can charge more on new loans; interest margins improve. That’s the reason that banks have propped up the STOXX 600 rally in recent years.'
However, technology stocks capped gains, falling 0.9%, tracking a global selloff. This decline was particularly pronounced in memory-chip names, such as STMicroelectronics, Soitec, and Infineon, which dropped between 1.4% and 2.3%, and ASML, which fell 1.8%. OCBC noted, 'Technology stocks led the weakness, particularly memory-chip names, after China’s CXMT announced progress on a denser DRAM design and plans to launch a new server-memory product by year-end, raising concerns over greater competition for established memory-chip producers.'
Luxury stocks, which had been a key sector, fell 1%, with LVMH leading the decline by 1.3%. This was due to weaker-than-expected third-quarter sales, as deteriorating consumer sentiment in China weighed on demand for Louis Vuitton and Dior brands.
Other notable movements included a 7.4% rise in Givaudan, the fragrance and flavour maker, after its third-quarter organic sales beat expectations. Nokia, the Finnish telecom gear maker, saw a 1.7% drop after agreeing to sell its Enterprise Campus Edge business to private equity group Aurelius.
The earnings season is expected to intensify on Wednesday, with ASML reporting its results. Investors will also be closely watching key September data from Germany, Europe’s largest economy, due later in the day.
European equities are caught between resilient corporate earnings and rising borrowing costs.
Lauren Hyslop, Investment manager at Mattioli Woods
Technology stocks led the weakness, particularly memory-chip names, after China’s CXMT announced progress on a denser DRAM design and plans to launch a new server-memory product by year-end, raising concerns over greater competition for established memory-chip producers.
OCBC, Financial institution
