Europe’s Stock Market Shows Little Trader Concern Over Iran
Europe’s Stock Market Shows Little Trader Concern Over Iran
(Bloomberg) -- Just two trading days after U.S.-Iran geopolitical tensions flared up, Europe’s equity market is bouncing back.
Stocks have pretty much already recovered losses fueled by the risk-off sentiment that hit markets last Friday after a U.S. airstrike killed a top Iranian commander. Meanwhile, equity volatility remains low and investors continue to pour money into the region’s funds.
While Iran said on Tuesday it’s assessing 13 scenarios to avenge the attacks and that even the weakest of those options would be a “historic nightmare” for the U.S., markets mostly shrugged. The Stoxx Europe 600 Index gained as much as 0.7%, erasing declines of the previous two days, as tech shares and retailers climbed the most.
Investors’ initial reaction on Friday was to fear that the crisis could send crude oil prices surging, which would hurt the global economy, said Andreas Lipkow, a strategist at Comdirect Bank. “In my view that was overdone, and nobody wants a full escalation in the Middle East.”
The VStoxx Index of euro-area stock swings has gained ground, but remains below its one-year average, while 1- and 3-month implied volatility readings on the Euro Stoxx 50 Index are also hovering near lows, offering little indication that traders are pricing in a big risk event.
JPMorgan Chase & Co. strategists are among those who remain bullish on equities in 2020. Historically, limited war campaigns and terrorist incidents tend to have only a “transitory impact on equities,” they wrote on Monday.
For BNP Paribas SA strategists, the U.S.-Iran tensions coupled with worries over a slowdown in U.S. growth could spark a pull-back in stocks in the near term. “However, we would view any weakness as a buying opportunity,” they wrote in a note.
Meanwhile, the Vanguard FTSE Europe ETF, the largest European stock-focused exchange-traded fund, saw inflows of $70.5 million in the latest session, according to Bloomberg data, showing renewed investor appetite for the region’s equities despite the tensions.
--With assistance from Jan-Patrick Barnert, Ksenia Galouchko and Michael Msika.
To contact the reporter on this story: Namitha Jagadeesh in London at njagadeesh@bloomberg.net
To contact the editors responsible for this story: Blaise Robinson at brobinson58@bloomberg.net, John Viljoen
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