European markets opened higher Thursday as crude prices slid more than 5 percent, buoyed by signs of military restraint in the escalating US-Iran conflict. Brent crude dropped to $89.94 a barrel, down 7.1 percent, as the Trump administration paused bombing runs on Iran for a second consecutive night and military advisers urged the president to halt the campaign entirely.
The price decline rippled through equities across the continent. The Stoxx Europe 600 index climbed 0.9 percent, with Germany's Dax jumping 1.5 percent and France's Cac 40 gaining 1.1 percent. London's FTSE 100 rose 0.5 percent. Bond yields fell in tandem, with 10-year Eurozone debt yields dropping roughly 3 basis points and UK gilts sliding 5 basis points to 4.98 percent.
Oil had spiked above $100 last week after consecutive US strikes against Iranian targets and threats of a Houthi naval blockade in the Red Sea. But analysts signaled the pause opened space for negotiations. "The situation remains highly fluid," cautioned Jim Reid of Deutsche Bank, noting that while no formal ceasefire existed, both sides were treating the lull as an opportunity for diplomacy. Iran had itself declared a pause on retaliatory attacks against US allies over the weekend.
The reprieve carries major caveats. Traffic through the Strait of Hormuz remains severely disrupted, and Iran-backed Houthi forces continued launching drone and missile strikes against Saudi energy infrastructure over the weekend, triggering retaliatory Saudi strikes. Shipping routes through the Red Sea remain under threat, raising the prospect of simultaneous disruptions to both Gulf and Red Sea export corridors. Richard Hunter, head of markets at Interactive Investor, cautioned that while deescalation represented the bull case, Houthi attacks on Saudi oil facilities remained a complicating factor.
Central banks also loomed large in investor calculations. The Federal Reserve was expected to keep rates unchanged this week despite inflationary concerns, though a September hike remained possible. The Bank of England was likewise expected to hold rates steady at its Thursday meeting, though economic headwinds persisted. Some recent data had surprised to the upside, but mortgage rate gains and sluggish growth continued to weigh on the broader economy.
AstraZeneca delivered a strong earnings beat, with cancer treatments fueling second-quarter profit growth. The pharmaceutical giant reported earnings per share of $2.63, up 18 percent, while revenue climbed 5 percent to $15.38 billion at constant currency for the three months ended in June.
Telecommunications giant Vodafone posted a 9.7 percent jump in first-quarter revenue to 10.3 billion euros, outpacing expectations. Service revenue rose 5 percent, beating forecasts of 4.6 percent growth, and management guided toward full-year adjusted earnings between 13 billion and 13.3 billion euros. The company had reshaped its portfolio in recent years by divesting Italian and Spanish operations and its Dutch joint venture stake, culminating in a merger with Three that created the UK's largest mobile operator. French billionaire Xavier Niel this month became Vodafone's largest shareholder after acquiring a 16 percent stake for 4.4 billion pounds.
Vodafone simultaneously faced scrutiny over allegations that it had enriched itself at the expense of vulnerable small business owners by slashing commissions paid to franchisees running its high street phone shops. The Guardian had first published the allegations.
Private equity was reshaping London's stock market. DCC Energy agreed to a 5.75 billion pound takeover by KKR and Energy Capital Partners, with shareholders receiving 65.25 pounds per share in cash plus a final dividend of 147.22 pence per share and potential additional payments up to 1.25 pounds per share if the company sold its technology unit for at least $800 million. The offer represented a 24 percent premium to the FTSE 100 energy distributor's late-April share price. Mitie, Intertek, easyJet, Beazley, and Schroders had all agreed to takeovers earlier in the year, signaling a wave of private equity activity in London.
Chinese fast fashion giant Shein reported a $99 million net loss in its first quarter, a dramatic reversal from $395 million in net income a year earlier. The shift came after the US scrapped its tariff exemption for small packages in May, triggering a sales slowdown. Shein revealed the figures in regulatory filings ahead of a planned Hong Kong listing and said it was exploring options including price increases in the US market to offset the tariff costs. The European Union this month imposed a 3 euro fee on low-value e-commerce imports, another headwind for the retailer. Shein's valuation has fallen sharply as pandemic-era online shopping booms gave way to normalized consumer behavior. The company is now seeking a valuation between $40 billion and $50 billion, down from reports of a potential $100 billion valuation in 2022.
Author James Rodriguez: "The oil reprieve is real breathing room for markets, but it's fragile and Houthis are still throwing punches in the Red Sea."
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