European stocks hover flat as oil falls and investors await US midterms
European equities showed little movement on Monday, buoyed by a drop in oil prices and cautious anticipation of US midterm elections and upcoming earnings reports.
European stock markets struggled for direction on Monday after a sharp tech sell-off on Friday, while oil prices fell sharply on hopes of a deal to end the Iran conflict. The STOXX 600 edged up 0.05%, with technology shares gaining 0.40%, as investors looked ahead to Apple’s earnings report and the upcoming US midterm elections.
The week remains pivotal, with market participants still processing the latest policy moves by the Federal Reserve and the European Central Bank, as well as a full swing earnings season. Euro-zone government bond yields were largely unchanged after last week’s rally, but sentiment stayed fragile amid concerns over France’s fiscal outlook and ongoing street unrest.
"Further expected downside for the Euro area PMI is a drag on our Stoxx 600 forecast trajectory," wrote Sebastian Raedler, head of European equity strategy at Bank of America. "However, the main reason for our caution on European equities is the risk of disappointment in the AI capex cycle as AI models commoditise and competitive moats prove limited."
US equity futures rose, with Nasdaq futures up 0.76% and S&P 500 futures up 0.34%, after the S&P 500 fell 1.82% and the Nasdaq dropped 2.86% on Friday. Analysts noted that a Democratic sweep in the US House could pressure equities through higher corporate taxes and tighter AI regulation.
Apple’s shares have risen for four consecutive months, helping the company overtake Nvidia as the world’s most valuable listed firm. Goldman Sachs analysts project hyperscaler capital spending to nearly double to $800 billion this year, while expecting S&P 500 earnings-per-share growth to slow to 18% next year from nearly 30% in 2026.
In foreign-exchange markets, major currencies were subdued; the euro gained 0.37% to $1.1199, while the dollar was flat against the yen at 157.72. Rising oil prices could weigh on the euro and yen, and some investors are questioning the dollar’s safe-haven status amid a potential tech-driven market sell-off.
George Saravelos, global head of forex strategy at Deutsche Bank, said the United States’ reliance on foreign equity inflows is historically unprecedented and that when equity shocks originate in the US, the dollar-equity correlation can turn positive.
Central banks meeting this week include the Reserve Bank of Australia, the Bank of England and Sweden’s Riksbank, all expected to raise rates, while Norway’s Norges Bank is seen holding steady. Key data releases this week include the US ISM manufacturing survey for October and the non-farm payrolls report on Friday.