By Tharuniyaa Lakshmi
July 20 (Reuters) – European shares were muted on Monday as an escalating U.S.-Iran conflict drove oil prices higher, stoking inflation fears just as markets head into another global corporate earnings season.
The pan-European STOXX 600 index was little changed at 641.65 at 0844 GMT.
U.S. strikes on Iran entered a ninth straight day on Monday, and risks to shipping through the Strait of Hormuz mounted after reports of tankers being immobilised. Brent crude prices jumped 3% to more than $90 a barrel for the first time in a month. [O/R]
Energy stocks rose 0.9%, while travel and leisure stocks fell 0.9%. Ryanair led losses on the STOXX 600, down 5%, after the budget airline reported a 34% drop in first-quarter profit, hurt by higher fuel costs and lower fares.
Meanwhile, tech stocks were up 0.2%, ahead of earnings from U.S. Big Tech stocks, which could provide fresh stimuli to an eye-popping AI-driven rally. Last week, stellar quarterly updates from ASML and TSMC failed to impress investors.
“There is a general relief this morning that nothing terribly bad has happened over the weekend… but the news has to be really positive to get some buying in,” said David Morrison, senior market analyst at Trade Nation.
A global pullback in tech stocks and renewed fighting in the Middle East dampened sentiment last week, wiping out most of the gains that stemmed from waning bets that the Federal Reserve would hike interest rates after weaker-than-expected U.S. inflation data.
“There are really mixed signals out there… CME’s FedWatch tool is saying there’s still expectations we’re going to get at least one 25 bps rate hike by end of the year, and yet, every market observer is convinced the Fed won’t actually raise this year,” said Morrison.
The European Central Bank meets later this week. Markets are expecting it to keep rates on hold, though they are pricing in at least one 25-basis-point hike by end-2026, according to LSEG-compiled data.
In the UK, investors will closely monitor the first speech by Andy Burnham, who is set to become Britain’s seventh prime minister in a decade, with the cost-of-living crisis and poorly performing services on his agenda.
Among others, Thule fell 4.8% after the sports and outdoor products maker reported second-quarter sales that slightly missed market expectations and warned of price hikes.
Swiss field device maker Belimo fell 3.6% despite the data center sector demand driving higher first-half revenue.
Computacenter advanced 3.6% to top the STOXX 600 after Berenberg upgraded the IT services provider.
IP Group gained 3.7% after Railpen, its largest shareholder, announced a sweetened takeover proposal for the early-stage science investor.
(Reporting by Tharuniyaa Lakshmi and Purvi Agarwal in Bengaluru; Editing by Harikrishnan Nair and Shinjini Ganguli)
