The escalation of military operations in the Iran conflict and the confirmed appointment of Mojtaba Khamenei as the Islamic Republic's supreme leader have fueled fears of a prolonged and widening war. This, coupled with production cuts by major Middle Eastern crude exporters, has sent oil prices surging above $100 per barrel, sparking concerns of significant inflationary pressure.
Against a backdrop of extreme market fragility, the Ftse Mib index is attempting to claw back ground in search of stabilization as the morning session draws to a close.
Traders are closely monitoring critical support levels across major European equity indices for signals that the risk-off sentiment might be cooling or, conversely, gaining further momentum.
"In this environment, Europe and emerging markets are vulnerable, not only due to their higher exposure to the energy shock but also because of the positive inflows into these regions in recent months, which had driven solid outperformance during the first two months of the year," Mps strategists noted in a daily briefing.
As of 1:05 p.m., the Milanese Ftse Mib index is down 1.3%, hitting its lowest levels since mid-December.
Stock Highlights:
** Banking stocks are retreating sharply, the primary victims of uncertainty regarding a potential economic slowdown and its impact on credit quality. The sector index is down 2.3%, reaching its lowest point since mid-October after an earlier, more pronounced slide to levels not seen since August of last year.
** UNICREDIT and BANCO BPM are slightly underperforming the sector average, with declines of 2.7% and 2.5% respectively. Asset management firms are also facing selling pressure, with AZIMUT dropping 3.9% and MEDIOLANUM down 2.7%.
** Industrials and consumer goods sectors are bearing the brunt of rising energy costs. FERRARI and STELLANTIS are both shedding approximately 3%.
** War headwinds are providing support to oil and defense stocks. ENI is up 0.5%, while LEONARDO has jumped 3.8%, further bolstered by Barclays upgrading its rating to 'overweight' from 'equal-weight' and raising its price target to 68 euros from 53 euros.
** NEXI is rallying, surging 3.8% following a slump during last Thursday's capital markets day. Morgan Stanley upgraded the stock to 'equal-weight' from 'underweight,' despite trimming the price target to 3 euros from 3.85 euros.
** Utilities remain weak. As Intermonte highlights, the primary risk for the sector stems from potential government measures aimed at reducing energy costs for households and businesses.
(Andrea Mandala, editing Antonella Cinelli)
