Market Wrap US-Europe 27 July: Europe Advances and the Dow Gains 0.5 Percent While Chip Stocks Drag the Nasdaq

By The Edge Research Team

US and European markets diverged on Monday as another steep session of oil declines rippled across assets, with Europe closing broadly higher, Wall Street finishing mixed and a sharp drop in semiconductors weighing on the Nasdaq, per CNBC. Brent crude settled 8.6 percent lower as the war-risk premium continued to unwind, our reading.

In New York the Dow Jones Industrial Average rose 0.51 percent to 52,210.08 and the Russell 2000 gained 0.66 percent to 2,949.39, both helped by lower oil and easing Treasury yields, our reading. The S&P 500 was little changed, up 0.02 percent at 7,413.18, while the Nasdaq Composite slipped 0.18 percent to 24,932.08. The drag came from chipmakers, the Philadelphia Semiconductor Index falling 2.23 percent to 11,554.88 and weighing on the technology-heavy benchmark, our reading.

European bourses closed broadly higher. Germany’s DAX led the major indices with a 1.04 percent gain to 25,361.03, followed by Spain’s IBEX 35 up 0.80 percent, Italy’s FTSE MIB up 0.49 percent, the United Kingdom’s FTSE 100 up 0.42 percent and France’s CAC 40 up 0.40 percent. The pan-European Stoxx Europe 600 and the Euro Stoxx 50 each edged up 0.02 percent, to 644.62 and 6,282.21 respectively.

The dominant move was again in oil. Brent crude settled 8.64 percent lower at 88.42 dollars a barrel and West Texas Intermediate 7.49 percent lower at 82.62 dollars, deepening a retreat that began late last week as a pause in US-Iran hostilities pulled the war-risk premium out of crude, per CNBC. Natural gas eased 3.62 percent. Precious metals were firmer, with palladium up 2.90 percent and platinum up 1.53 percent, gold little changed at about 4,078 dollars an ounce, up 0.18 percent, and silver off 0.45 percent. Copper firmed 0.46 percent, while market volatility stayed contained, the VIX near 18.7.

In currencies the dollar was little changed, the ICE dollar index near 101.5, up 0.04 percent. The euro was steady at 1.1370, up 0.03 percent, while sterling eased 0.22 percent to 1.3290 and the yen held near 163.74 to the dollar. The Kuwaiti dinar was firm, the dollar buying 0.3078 dinar. The Egyptian pound strengthened, the dollar easing 1.15 percent to 50.67 pounds, extending its recent firmness. Treasury yields slipped, the 10-year to 4.647 percent, down about 3 basis points, and the 2-year to 4.32 percent. Bitcoin was steady near 64,900 dollars, up 0.42 percent.

Earlier in the day Asian markets had closed broadly higher and Gulf bourses mostly firmed, as our separate MENA and Asia wrap set out and the reference tables below summarise. In Asia the Shenzhen Component led with a 2.72 percent gain and the Kosdaq rose 2.22 percent, while in the Gulf Dubai’s DFM General added 0.99 percent and Qatar’s QE Index rose 0.82 percent. Egypt’s EGX 30 closed 0.40 percent higher.

Why it matters: The second day of the oil decline is reshaping the cross-asset picture, our reading. For Gulf producers the retreat in crude trims near-term export revenue, but the accompanying fall in the war-risk premium lowers the security and inflation overhang that a sustained conflict would carry, provided the reported US-Iran pause holds. For import-heavy economies such as Egypt, cheaper energy alongside a firmer pound at 50.67 to the dollar eases the external bill, our reading. In the United States the split between firmer cyclicals and weaker chipmakers points to rotation rather than a broad move, our reading, while Europe’s advance tracked the relief from lower energy costs.

Outlook: The near-term question is whether Brent stabilises below 90 dollars or the war premium rebuilds if the US-Iran pause frays. The immediate calendar is heavy: the Federal Reserve’s policy decision on Wednesday, the first reading on second-quarter US growth and the June inflation gauge on Thursday, and a run of major US technology earnings, all of which will shape the dollar, yields and the demand outlook that markets trade against. Markets will also watch whether the semiconductor weakness extends or proves a single-session move, our reading.

Table – US indices, 27 July close, ranked by change:

Table – Europe indices, 27 July close, ranked by change:

Table – Rates, the dollar and currencies, 27 July:

Table – MENA and Asia, 27 July close, for reference, ranked by change:

Table – Commodities, 27 July settlement, for reference, ranked by change:

Price basis: US and European equity levels are Monday 27 July closing prints; the commodity figures are Monday 27 July futures settlements, consistent with our same-day commodities wrap; the rates, dollar, currency and crypto figures are intraday levels captured in the New York afternoon; the MENA and Asia figures are the same day’s closes reused from our published MENA and Asia wrap. Crude is Brent and WTI for September delivery.

Sources: CNBC.

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