European Shares Retreat from Records

European stocks began March on a negative note, retreating from record levels touched last week, as escalating tensions with Iran sparked a broad risk-off move across global markets. The STOXX 50 fell nearly 2%, while the STOXX Europe 600 dropped 1.7%, reflecting a widespread equity sell-off. The downturn followed a series of attacks by the US and Israel on Iran, which prompted retaliatory strikes by Tehran against targets in the region, heightening geopolitical uncertainty. All sectors retreated except oil and gas, as the conflict drove energy prices sharply higher. Consumer discretionary, financial, and technology stocks led the declines. Megacaps came under heavy selling pressure, with ASML Holding falling 3.9%, HSBC Holdings sliding 4.9%, and LVMH also dropping 3.9%. In contrast, Shell climbed nearly 5%. Defense stocks were also higher, namely BAE Systems (8.3%), Thales (5.5%), Leonardo (4.3%) and Rheinmetall (3.7%).

European equity markets were set to open sharply lower on Monday as global risk appetite deteriorated following a major escalation in the Middle East conflict. The US and Israel carried out strikes on Iran over the weekend, resulting in the death of Iran’s Supreme Leader, Ayatollah Ali Khamenei, and the effective closure of the Strait of Hormuz. Energy prices surged, adding pressure on Europe as the region moves to secure significant natural gas supplies amid record-low storage levels. Meanwhile, investors will assess retail sales data from Germany, GDP figures from Turkey and Italy, as well as manufacturing PMI reports across the bloc. Data on Friday showed German inflation came in below forecasts in February, while price growth accelerated in France and Spain. Money markets currently assign only about a 30% probability to a rate cut by the European Central Bank by December. In premarket trade, Euro Stoxx 50 and Stoxx 600 futures were down 1.5% and 1.1%, respectively.

European stocks closed mixed for a second session on Friday as markets assessed a batch of earnings reports and fresh inflation data for hints on the European Central Bank's rate outlook. The Eurozone's STOXX 50 fell 0.5% to 6,130 and the pan-European STOXX 50 gained 0.2% to a new record of 634. EU-harmonized inflation rates in France and Spain were ahead of their expectations, but the gauge from Germany unexpectedly eased, maintaining earlier expectations that the ECB is due to hold its key rates for the upcoming meetings. Banks closed sharply lower, with Santander losing nearly 3% on reports that it is likely to face defaults from Market Financial Solutions in their ongoing collapse. Meanwhile, BASF fell 2% after reporting a drop in annual sales. Outside the Eurozone, Swiss Re jumped 3.8% after recording a sharp annual increase in profit, and Deutsche Telekom added 3.6% as markets continued to digest their earnings results from yesterday.