- The pan-European STOXX 600 index rose 1% on Monday to 631.63 points, marking a new closing high in over two months, fully recovering all losses since the outbreak of the Middle East conflict in late February.
- Brent crude oil futures on the Intercontinental Exchange fell 5% to around $98 per barrel, directly easing cost pass-through, driving Lufthansa and Air France-KLM to soar 3.4% and 6.2%, respectively.
- The technology sector recorded the highest gain among all industries this quarter with an increase of over 25%, with ASML and Schneider Electric closing up 1.5% and 3.1%, respectively, following AI optimism.
The pan-European benchmark index showed strong valuation recovery momentum on Monday. Boosted by positive news of a preliminary framework agreement between the US and Iran to reopen the Strait of Hormuz, the market's systemic risk premium significantly declined. Although trading was relatively light due to public holidays in the UK and US, European core stock indices rose across the board. The German DAX index notably closed with a 2.01% gain, while the French CAC 40 index also closed up 1.76%. The STOXX 600 index is now less than 1% away from the all-time high set in February this year, having largely erased the market anxiety caused by previous concerns over imported inflation.
Decline in Risk Premium Triggers Systematic Revaluation of Cyclical Sectors
Marginal improvements in commodity channels became the core catalyst for the day's bullish momentum. As Brent crude oil futures prices fell below the $100 per barrel mark to around $98, airline stocks, long suppressed by high jet fuel costs, experienced a systematic valuation recovery. Air France-KLM surged 6.2% at the close, with Lufthansa also rising 3.4%. Meanwhile, the banking sector recorded a 2% overall gain for the day, leading the market as systemic concerns over macroeconomic fragility eased. Several traders noted that in the context of falling oil prices, the corporate cost-benefit models previously worsened by the Middle East conflict are being frequently revised.
AI Boom Builds Long-term Alpha Returns for European Tech Sector
Apart from the marginal cooling of geopolitical risks, the internal industrial capital logic of the technology sector remains a key pillar supporting the bottom of European stocks. Statistics show that the technology industry index has soared over 25% this quarter, firmly ranking first among all sub-sectors. Semiconductor equipment giant ASML closed up 1.5% on Monday, while Schneider Electric, deeply involved in AI data center infrastructure construction, recorded a significant gain of 3.1%. Buy-side institutional funds emphasized in reviews that even in the face of marginal constraints from a macro high-interest rate environment, core targets in the AI industry chain with substantial earnings per share growth potential still possess strong immunity to risk premiums.
Cautious Delineation of Upward Space by Macro Analysis Institutions
Despite the optimistic market sentiment, international macro research institutions have issued conditional warnings about the future space for European assets. In its latest investment portfolio report, Capital Economics pointed out that the normalization of energy prices cannot happen overnight, meaning that sticky inflation on the supply side may still exist. More critically, since major developed economies still face rigid constraints on the interest rate cut window this year, the suppression from the denominator side has not been completely lifted. Analysts emphasized that if the legal details of the subsequent ceasefire agreement fluctuate, the currently overvalued optimism may trigger a phase of volatility and correction in European stocks.
Cross-geopolitical Situation Differentiation Provides Structural Support for Defense Assets
Monday's multi-dimensional market movements also reflected the complex interweaving of different global geopolitical epicenters. While positive progress was reported in the Middle East situation, the Eastern European situation escalated again due to Russia's intensive bombing of Kyiv and surrounding infrastructure. This cross-variable directly led to a 2% rise in the defense sector index against the trend. Macro hedge funds pointed out in asset allocation that the European market currently exhibits an internal hedging characteristic of geopolitical risks, with the easing of the Middle East situation benefiting traditional cyclical and technology assets, while the rigidity of the Eastern European situation provides long-term fundamental support for the defense and military-industrial chain.
