-- German equities kicked off a new trading week on a downbeat note, closing Monday's session 0.26% lower, as the US moved to seal the Strait of Hormuz after weekend peace talks ended without a deal.
"Markets have seen a clear risk-off move this morning after no deal was reached in the US-Iran talks over the weekend, with the US set to blockade the Strait of Hormuz for vessels entering or departing Iranian ports. So, despite last week's optimism when the two-week ceasefire was announced, the mood has shifted negatively once again, with Brent crude oil prices up +7.39% this morning to $102.24/bbl. And in turn, that's revived fears about a stagflationary shock, with equities and bonds losing ground around the world," Deutsche Bank Research said.
With the Strait of Hormuz closure fueling a surge in energy costs, Bloomberg News reported that the European Commission is set to recommend reduced power grid fees and energy taxes, aiming to accelerate clean technology adoption while shielding the bloc's economy from volatile oil and gas prices. Citing people with knowledge of the matter, the news outlet said a formal policy paper outlining the relief measures is expected to be adopted by the European Union's executive arm on April 22.
In economic news, investors are on the lookout for Tuesday's German wholesale price data and Thursday's final eurozone inflation reading for March. Market attention is also expected to shift to the ongoing International Monetary Fund and World Bank Spring meetings, with Tuesday's release of the IMF's World Economic Outlook anticipated to be a key focus.
On the corporate side, Rheinmetall (RHM.F) and Norwegian defense technology company Destinus agreed to form a joint venture, Rheinmetall Destinus Strike Systems, focused on advanced missile production. The Unterlüß, Germany-based entity is expected to launch in the second half, pending regulatory approval, with the German defense supplier holding a 51% majority stake. Rheinmetall shares added 2.45% and the stock was the DAX's top gainer.
Meanwhile, Deutsche Bank Research cut its price target for MTU Aero Engines' (MTX.F) buy-rated stock ahead of the company's first-quarter results due on April 30.
"We expect no impact from the Middle East conflict on Q1 activity, but some increased focus on MTU's sensitivity to potential engine retirements and its impact on midterm guidance. We lower our Price Target (PT) from EUR449 to EUR428 on more conservative cash conversion rates assumptions, moving 2030 levels down from 89% to 76%," the research firm said in a preview note. The German aircraft engine manufacturer was down 0.89% at closing.