by Diana Mandia

(Reuters) – European stock markets ended lower on Tuesday as investors shunned risk on fears of a possible imminent Iranian attack on Israel, sending oil and sovereign bond prices higher.

In Paris, the CAC 40 lost 0.81% to 7,574.07 points. In Frankfurt, the Dax fell 0.65%, while in London, the FTSE 100 gained 0.48%, supported by low resources.

The EuroStoxx 50 index ended down 0.99%, the FTSEurofirst 300 by 0.36% and the Stoxx 600 by 0.44%.

Geopolitical tensions in the Middle East overshadowed on Tuesday reassuring data on inflation in the euro zone and good omens of a third interest rate cut by the European Central Bank (ECB) in October, steering investors away from risk. and pushing many indices that had opened higher into the red.

The United States has indications that Iran is preparing to launch an imminent ballistic missile attack against Israel, while the Israeli military has reported heavy fighting against Hezbollah, according to a senior White House official. in southern Lebanon, where it said it was carrying out “targeted” ground operations against the Lebanese Shiite movement.

“The situation in the Middle East continues to evolve rapidly. With Iran and Lebanon more directly involved in the Middle East conflict, current reactions are resulting in rising crude and gold prices, he said. says Anthony Saglimbene, strategist at Ameriprise Financial.

Fears of an extension of the conflict in an oil-producing region immediately pushed up crude prices which, until now, had resisted tensions in the Middle East quite well thanks to the prospects of a solid supply.

Safe havens such as the US dollar, Japanese yen and Swiss franc strengthened, as did the prices of sovereign bonds, whose yields were already falling sharply due to slowing inflation in the eurozone under the 2% mark for the first time in more than three years.

The deceleration in prices also fueled hopes of a third rate cut at the ECB meeting this month, as did comments from several officials at the Frankfurt-based institution, including the bank’s governor. from Finland, Olli Rehn.

In France, the session was rather volatile and marked by the general policy speech of Prime Minister Michel Barnier, who said before the National Assembly to plan an exceptional tax on large groups which make significant profits, an initiative aimed at contributing to the debt reduction effort.

According to Barclays analysts, the growth in earnings per share of French financial stocks could be particularly affected by this measure, particularly among banks.

VALUES

Two heavy sectors of the CAC 40, luxury and banks, in the red since the start of the session, widened their losses towards the end of the day due to Barnier’s announcements and in a context of risk aversion linked to the geopolitical situation.

In Paris, Kering, whose recommendation on the value had been lowered to “sell” by Goldman Sachs at the start of the day, dropped 2.8%, while L’Oréal, LVMH and Hermès sold between 2.6% and 3.5%. The European segment of the sector fell by 2.5%.

The Air France-KLM share lost 6.7%, hitting the lowest point in the SBF 120 index, after information from the newspaper Les Echos reporting a possible increase in the tax on plane tickets in France .

The European oil compartment ended with a gain of 1.35%, supported by the rise in crude prices.

In Frankfurt, Covestro gained 3.7% while Abu Dhabi’s public oil company, ADNOC, announced on Tuesday that it had agreed to buy the chemical giant.

A WALL STREET

Wall Street’s main indexes fell Tuesday on fears of an escalation in the Middle East, as investors digested data on the labor market and manufacturing sector activity released earlier in the day.

TODAY’S INDICATORS

Manufacturing activity in the euro zone fell in September at its fastest pace since the start of the year, and Germany, Europe’s largest economy, recorded its sharpest deterioration in working conditions in factories since 12 months, shows a survey published Tuesday.

In the United States, manufacturing activity remained stable in September, but new orders improved and prices paid for inputs slowed to a nine-month low, according to the Institute’s monthly survey. for Supply Management (ISM) published Tuesday.

The latest “Jolts” (Job Openings and Labor Turnover Survey) report from the US Department of Labor also showed that the number of job openings increased unexpectedly in August.

CHANGES

Safe havens are sought after in a context of geopolitical uncertainties, which strengthens the US dollar against the European currency.

The greenback, which was already moving higher after Federal Reserve Chairman Jerome Powell on Monday pushed back bets on further aggressive interest rate cuts, gained 0.50% against a basket of currencies of reference, while the euro fell 0.63% to 1.1064 dollars.

RATE

Bond yields fell sharply in the euro zone in response to September inflation data and amid risk aversion that pushed up sovereign bond prices.

The ten-year German Bund yield lost 9.1 basis points to 2.0430%, while the two-year fell 4.8 basis points to 2.0240%.

The yield on the ten-year OAT fell 9.8 basis points to 2.8260% and that of Italian government bonds of the same maturity fell 8.2 basis points to 2.8260%.

In the United States, Treasury bond yields are also falling, as signs of escalation in the Middle East have boosted demand for safe-haven assets and thus bond prices.

OIL

Oil prices rose more than 3% after press reports that Iran was preparing to launch a missile attack against Israel.

Brent rose 3.75% to $74.39 per barrel and American light crude (West Texas Intermediate, WTI) advanced 4% to $70.90.

TO BE CONTINUED ON OCTOBER 2:

Possible para text in the event of major indicators, important monetary and/or political events expected the next day.

(Some data may have a slight lag)

(Written by Diana Mandiá)

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