Stoxx 600 rises 0.9%, nearing record as oil falls

Key Facts

European stocks rose on Tuesday, November 10, nearing a new record, with the pan-European Stoxx 600 up 0.9%, according to an Investing.com report. Gains came as energy prices retreated, after futures for benchmark crude fell below $100 a barrel. The report linked the drop in oil to investor optimism about the possibility of diplomatic talks between the United States and Iran. That helped ease concerns about energy-related inflation, as markets remained focused on the path of prices and U.S. interest rates. The index had also gained in the previous session, making Tuesday's advance part of a broader move in European markets.

Gains extended to major national indexes, with Germany's DAX, France's CAC 40, Italy's FTSE MIB and Spain's IBEX 35 each rising 1.3%. London's FTSE 100 gained 0.7%, according to Investing.com. The gains in the German, French, Italian and Spanish indexes therefore outpaced the broader European index's 0.9% rise. The moves showed the advance spreading across the continent's markets during the session rather than being confined to one index. European stocks gained on Monday, November 9, with the Stoxx 600 up 1.26%, as banks advanced on trading linked to Crédit Agricole and Banco BPM, alongside strong results from UniCredit, according to Reuters via Euronext.

Benchmark crude futures extended their decline on Tuesday, falling 1% during the session to $91.56 a barrel, their lowest level since early September, according to an Investing.com report. The price thus fell below the $100 threshold, which the report described as an important psychological level for traders. The report attributed the latest wave of declines in energy markets to growing optimism about the possibility of talks between Washington and Tehran. It said traders were factoring in a lower risk of an immediate military escalation in the Gulf. In Asian trading on Tuesday, Brent crude fell 1.2% to $91.48 a barrel, while U.S. crude dropped 1.3% to $85.72, according to the Associated Press.

The decline in oil followed Monday's moves, when Reuters via Euronext reported that Brent crude fell more than 5% after U.S. President Donald Trump said he did not expect to order new attacks on Iran if talks to end the war made progress. Reuters linked the crude decline at the time to easing inflation concerns. The Associated Press reported that Trump described a resumption of strikes as "highly unlikely" if the United States saw progress in negotiations to end the war. The agency noted that the U.S. secretary of state criticized Iran's demands. The course of the talks and the risk of escalation therefore remained among the factors investors were watching in the energy market during the European session.

Meanwhile, investors were awaiting the U.S. Consumer Price Index report for October, due later on Tuesday, November 10, according to Investing.com. Economists expected the report to show prices rising at a moderate pace, but remaining high enough to support further tightening by the Federal Reserve. The data therefore represent a test of monetary policy expectations, even as falling oil prices supported sentiment in European stocks. The report did not link Tuesday's advance to easing inflation in the euro zone, but listed the anticipated U.S. price data among the markets' main areas of focus. Their impact will depend on whether they align with economists' estimates or heighten concerns that monetary policy will remain tight.

Markets became more sensitive to price data after the U.S. jobs report released the previous Friday, with market-implied odds of a Federal Reserve rate increase at its December meeting rising to 84% from 74% a week earlier, according to the report. Investors thus put the probability of an increase at 84% as of November 10, compared with pricing of 74% a week earlier. The report said a higher-than-expected CPI reading could entrench expectations of tighter monetary policy. It added that this could tighten financial conditions globally and test the ability of European stocks to hold near record levels. U.S. inflation data remain the next event on the calendar in these developments, as attention turns to their effect on rate and equity expectations.