European stock markets bounce higher; bond yields tumble as oil slides
European stock markets have also bounced higher, while government borrowing costs retreated, as oil prices slid on reports that more supplies are passing through the Gulf than though.
The UK’s FTSE 100 index rose 0.36% to 10,697, up nearly 40 points. Germany’s Dax gained nearly 0.7%, France’s CAC rose 0.6%, Italy’s FTSE MiB advanced 0.74% and Spain’s Ibex is up 0.5%.
The pan-European Stoxx 600 rose 0.65%, led by technology and travel stocks.
The tech sub-index increased 1.9% as chip-linked stocks Soitec jumped 4.6% and Aixtron advanced 3.9%.
France’s Soitec manufactures substrates that are used to make semiconductors, used in smartphones, tablets and computers while Germany’s Aixtron, founded by university researchers in 1983 as a spin-out from RWTH Aachen University, also produces components for chipmakers.
US stock futures are pointing to a stronger open on Wall Street later, suggesting the tech-heavy Nasdaq could rise almost 1%.
Brent crude, the global oil benchmark, is down 2% (or $2.1) at $101.78 a barrel, the lowest in more than a week. This has triggered hopes of lower inflationary pressures, and pushed government bond yields lower after Friday’s turmoil, sparked by expectations of a steeper path for interest rates.
The yield, or interest rate, on the 10-year UK gilt fell nearly 7 basis points to 5.241%.
Italy’s 10-year yield dropped 9 basis points to 4.355%, after jumping 10bps on Friday. The equivalent French yield fell 10bps to 4.47%, after rising 12.5bps on Friday. The German 10-year yield eased 5ps to 3.47%, wiping out Friday’s increase.
Bund yields drop, shrugging off German vote but Merz under scrutiny
German markets have largely shrugged off the results of two regional elections.
The yield on the 10-year government bond, known as Bund and the eurozone benchmark, retreated 5 basis points to 3.48% this morning, mirroring moves in other countries.
The main stock exchange, the Dax in Frankfurt, rose 0.8%.
Germany’s embattled chancellor, Friedrich Merz, has vowed to stay in office and fight for future-proofing economic changes despite heavy losses for his conservative party in two state elections, one to the far right in Mecklenburg-Western Pomerania, and the other to a leftwing party, in Berlin.
Preliminary results indicated Merz’s Christian Democratic Union (CDU) tallied just 4.9% in Mecklenburg-Western Pomerania, below the 5% threshold needed to enter the state parliament and indicating the party may be excluded altogether. It would be the CDU’s worst-ever state score, which Merz called a “disaster”.
Reuters reports: Iran has conveyed its conditions to mediators for re-engaging in negotiations aimed at ending the war with the US, Al Jazeera cited Iran’s security chief, Mohsen Rezaei, as saying in an interview on Saturday.
However, tensions in the Middle East remained high as Yemen’s Iran-backed Houthis said they attacked “sensitive” sites in the Saudi capital of Riyadh on Saturday with missiles and drones, as well as an Aramco facility in the Red Sea city of Yanbu, a key oil export hub.
On Monday, a spokesman for the Revolutionary Guards, Hossein Mohebbi, said Iran would use new weapons and target locations not previously attacked if the US launched a new offensive, according to the Fars news agency.
China has asked Iran to help rein in the Houthis after an appeal to Beijing by Saudi Arabia following the attacks, three Iranian sources told Reuters.
The attacks by the Houthis on Saudi Aramco’s East-West pipeline have prompted the state energy firm to ramp up exports through the strait of Hormuz this month and next after halting some shipments via Yanbu.
Middle East oil flows remain surprisingly strong despite the disruption to Saudi Arabia’s East-West pipeline.
They added that total oil flows averaged 17.1m barrels per day (bpd) in the past 10 days, just 6.1m bpd below the 2025 average.
“The most notable pivot has come from Saudi Arabia,” the analysts said, as satellite data indicated Saudi oil moving through the strait of Hormuz averaged 2.9m bpd over the past six days, up from just 700,000 bpd in August.
Introduction: Asian shares rise amid optimism around US-Chinese talks on trade and AI; oil prices slide
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Stock markets in Asia have risen led by technology shares, lifted by optimism around talks between the US and China on trade and artificial intelligence, while oil prices declined.
The talks between US and Chinese economic officials on Sunday came ahead of much anticipated summit on Thursday between US president Donald Trump and Chinese president Xi Jinping in Washington.
US Treasury secretary Scott Bessent said the two countries had discussed setting up a channel to communicate about AI issues called the “US-China AI dialogue”.
Chinese state media described the talks as “candid, in-depth and constructive”.
Nvidia’s co-founder and chief executive Jensen Huang has rejected grim warnings from AI researchers that the technology could lead to humanity’s extinction within a few years, calling this overblown “doomsday narratives”. He told CBS News:
2030 is not going to be the end of the world. There is 0% chance that’s going to be the end of the world.
Scaring people is unnecessary. It is irresponsible.
Hong Kong’s Hang Seng gained 0.88%, South-Korea’s tech-heavy Kospi jumped 2% and China’s CSI 300 rose 0.6%. Tokyo was closed for the silver week holiday, which runs until Wednesday.
Stephen Innes, analyst at Quintex Intel, said:
Scott Bessent and Chinese vice premier He Lifeng have already laid the groundwork [for the Trump-Xi meeting] in New York, with trade, investment and artificial intelligence on the table, but this is not a market waiting for a grand bargain.
It is waiting to see whether both sides can keep the next trade grenade in the drawer.
Oil prices are down sharply this morning, adding to Friday’s declines on hopes that Saudi Arabia is moving to restore about half of crude shipments after they were disrupted by the stoppage of its east-west pipeline to the Red Sea, despite ongoing attacks by Yemen’s Houthis.
Brent crude, the global oil benchmark, fell just over 2% to $101.8 a barrel, a drop of $2.01. But it remains above $100 and significantly higher than pre-Iran war levels of around $72 a barrel.
There was relief that the bombing threatened by Trump has not happened (yet). Governments across the Middle East are bracing for an escalation of violence after Iran claimed it had received intelligence that the US was preparing for a renewed bombing campaign against the Islamic Republic.
The US president reportedly told a Fox News reporter “very big things are going to be happening in the not-so-distant future” and that the options he was considering were “wiping Iran out, letting them rot economically or making a deal”.
Investors are also hoping for diplomatic progress on the Iran war at this week’s UN meeting. Trump said he would be open to mmeeting Iranian president Masoud Pezeshkian, who is expected to be in New York for the UN General Assembly.
9.30am BST: UK S&P Global Consumer sentiment index
9.30am BST: ONS to publish “Measuring artificial intelligence in the UK economy using a thematic account
1.30pm BST: US Chicago Fed National Activity Index for August
2.10pm BST: IMF managing director Kristalina Georgieva speaks at the IMF Legal Department 80th anniversary conference in Washington