European Stocks Drop as Brent Crude Nears $100 a Barrel

TLDR

Novartis is on track for its worst day on record, falling over 10% after a second drug trial failure in two days The pan-European STOXX 600 dropped 0.6% as oil prices pushed toward $100 a barrel Brent crude rose nearly 2% after Iran threatened to target Gulf energy infrastructure Banking shares fell 1.3% on concerns about a recessionary outlook for the eurozone The European Central Bank is expected to raise rates by 25 basis points on Thursday

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European stocks fell on Tuesday as rising oil prices stoked inflation fears and Novartis suffered one of the worst single-day crashes in its history.

The pan-European STOXX 600 dropped 0.6% to around 646 points by mid-morning. Germany’s DAX, France’s CAC 40, and London’s FTSE 100 all fell between 0.4% and 0.6%.

EURO STOXX 50 I (^STOXX50E)

Novartis Hit by Back-to-Back Drug Trial Failures

Novartis was the biggest loser on the STOXX 600, falling more than 10%. The Swiss drugmaker announced that its late-stage trial for del-desiran, a treatment for myotonic dystrophy, failed to meet its primary endpoint.

That news came just one day after Novartis revealed that pelacarsen, its experimental cholesterol drug, also failed in a late-stage trial. Two setbacks in two days sent investors heading for the exit.

Fiona Cincotta, senior market analyst at Stone-X, noted that Novartis had still posted solid gains earlier in the year before these setbacks.

Sandoz, by contrast, gained 4.5% after the Swiss pharma company said it aims to more than double net sales between 2025 and 2035.

Poste Italiane sweetened its takeover offer for Telecom Italia. Shares of Telecom Italia rose 2.5% on the news, while Poste Italiane traded flat.

Oil Prices Near $100 as Middle East Tensions Rise

Brent crude futures traded around $98.50 a barrel after Iran threatened to strike energy infrastructure across the Gulf, including U.S. oil and gas assets, if attacked. That pushed energy shares up 0.6% even as the rest of the market fell.

Higher oil prices are adding to inflation pressure across Europe and globally. Bond markets saw a selloff last week, and central banks are now expected to hold rates higher for longer.

The European Central Bank is widely expected to raise interest rates by 25 basis points at its meeting on Thursday.

Investors are also watching U.S. inflation data due later this week. That report follows a stronger-than-expected U.S. jobs reading, which raised bets on another Federal Reserve rate hike this month.

Banking shares in Europe dropped 1.3%. Analysts say banks tend to reflect concerns about a slowing economy first, and higher oil prices are fueling worries about a possible recession in the eurozone.

The euro held steady around $1.16. UK 10-year bond yields rose 2 basis points to 5.19%, and Germany’s 10-year yield edged up to 3.39%.

Germany reported a trade surplus of €21.27 billion, while France’s trade deficit widened to €6.7 billion in July.

The pressure on European markets comes after a quiet Monday, when U.S. markets were closed for the Labor Day holiday.

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