European shares muted as oil rally fuels caution; Novartis tumbles
Novartis was the biggest faller on the Stoxx 600
European shares remained relatively stable on Tuesday, September 8, with the Stoxx 600 European index experiencing minimal change. However, several factors contributed to a cautious market sentiment. Rising oil prices and escalating tensions in the Middle East kept investors on edge. Novartis, a Swiss pharmaceutical company, experienced the steepest one-day decline on record, dropping 10.9 percent after two consecutive failures in its drug pipeline.
The first setback involved an experimental treatment for a muscle-wasting disorder, which failed in a late-stage trial. This news followed earlier reports of an experimental cholesterol drug also failing a closely watched late-stage study. Energy shares, on the other hand, gained 0.6 percent as Brent crude futures remained near US$98 a barrel.
The price surge was triggered by Yemen's Iran-aligned Houthi forces attacking energy facilities and cities in Saudi Arabia, raising concerns about potential disruptions to fuel supplies in global markets. Mining stocks also benefited from the price increase, with copper prices climbing. Boliden, Antofagasta, and KGHM saw gains ranging from 4.6 percent to 6.3 percent, while the broader European mining index rose 2 percent.
Meanwhile, German exports unexpectedly declined in July, indicating weakness in the trade-driven recovery of Europe's largest economy. This development put pressure on the European Central Bank, which is expected to raise interest rates by 25 basis points on Thursday. Despite the central bank's hints of limited appetite for further tightening, markets anticipate additional rate hikes by year-end and in 2027.
Central bank officials have signaled that moving from the 'insurance' end of the spectrum to 'restrictive' territory would be significant. However, some analysts express doubt, citing potential spillover effects on European bond markets. Attention is also shifting to upcoming US inflation data, which will follow a stronger-than-expected US jobs report, reinforcing expectations of another Federal Reserve rate hike this month.
Among other notable movements, Kion Group, a German forklift manufacturer, rose 6.8 percent after Citi upgraded the company to "buy" from "neutral." The upgrade was based on a potential turning point in the industrial-truck cycle.
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