While American markets were closed for Labor Day, European equities ground to a near-flat close on Monday, masking a surge of political uncertainty underneath.
In Germany, the AfD obtained a landslide victory in Saxony-Anhalt, marking the first political win for a far-right party since the Second World War.
The AfD took roughly 44% of the vote – its first major state-level win – falling short of an absolute majority but handing Chancellor Friedrich Merz’s CDU its worst-ever result in the state since reunification.
Germany’s DAX 40 slipped 0.2% to 26,005, while 10-year Bund yield rose about 5 basis points to 3.39%, a whisker from the more than 15-year high of 3.3951% set last week.
Italy’s 10-year yield climbed 7 basis points to 4.22%, France’s added 4 basis points to 4.25% and the UK 10-year gilt rose 4 basis points to 5.18%. The German 2-year yield gained 6 basis points to 3.00% while the 30-year rose 4 basis points to 3.85%.
The geopolitical picture remains complicated. Brent crude climbed above $97 on fresh US-Iran tanker strikes.
The US struck three Iranian oil tankers over the weekend, destroying one, and Tehran responded by threatening a new restricted zone outside the Strait of Hormuz, warning that ships face strike risk near Oman’s Khasab.
The Financial Times reported a Saudi Aramco facility was hit in fresh strikes.
WTI crude rose 1.8% to $93.10 a barrel, extending its month-to-date gain to 13.4%. Brent added 1.4% to $97.63.
In metals, copper stole the session, surging to an all-time high above $14,530 a ton on the London Metal Exchange, with the COMEX contract up 0.5% at $6.63 a pound. Gold slipped 0.4% to $4,415 an ounce and silver added 0.5% to $66.30.
The energy squeeze is no longer confined to oil. European gas jumped 2.1% is now up 20.8% on the month.
The European Central Bank is widely expected to deliver a 25-basis-point hike on Thursday, its second of the year, with eurozone inflation running at 3.3% in August against a 2% target.
Traders are pricing roughly a 90% probability of another hike by year-end. Markets are also leaning toward a Federal Reserve hike after August nonfarm payrolls came in at 162,000 against expectations near 56,000, with Friday’s US CPI the week’s decisive print.
Monday’s Performance In Major European Indices
| Index | Last | % Change |
|---|---|---|
| DAX 40 | 26,005 | -0.2% |
| CAC 40 | 8,293 | +0.2% |
| FTSE 100 | 10,817 | -0.1% |
| Euro STOXX 50 | 6,399 | +0.1% |
| STOXX Europe 600 | 649.90 | 0.0% |
European Stocks Moving Monday
Infineon Technologies AG (OTC:IFNNY) soared 6.4% to 60.50, the best performer in the DAX, as strong signals from South Korean memory-chip makers rippled through the sector following the launch of OpenAI’s GPT-6 Astra model.
ASML Holding NV (NASDAQ:ASML) gained 2.3% and STMicroelectronics NV (NYSE:STM) rose 4% on the same AI enthusiasm.
The AI-electrification trade travelled with it. Schneider Electric SE (OTC:SBGSY) advanced 2.8% and Legrand SA (OTC:LGRDY) added 2.4%.
Energy was the other winner as crude pushed higher. TotalEnergies SE (NYSE:TTE) rose 1.5%, helped both by oil and by news.
In London, Shell PLC (NYSE:SHEL) gained 1.1% and BP PLC (NYSE:BP) rose 1.3%.
In healthcare, Novartis AG (NYSE:NVS) fell more than 3% after its cholesterol drug failed to meet expectations in a closely watched study.
SAP SE (NYSE:SAP) shed 1.9% one of the heaviest drags on the German index given its weighting, consistent with rate-sensitive software de-rating as yields climbed.
U.S. cash equity and Treasury markets will reopen Tuesday at 9:30 a.m. ET.
Attention then turns to Thursday’s ECB decision and Friday’s US CPI report, with Treasury auctions through the week testing demand at multi-year-high yields.
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