Market Wrap: Capital Flees Europe

Date: 6 March 2026

Market Overview

The European session has been characterized by significant declines across various sectors. The EU50 index has dropped by 1.5%, while emerging markets, particularly Poland's W20, have seen a decline of 1.6%. The sell-off is widespread, affecting growth sectors like technology (e.g., ASML down 3.4%), cyclical sectors such as finance (HSBC down 0.7%), and defensive sectors including pharmaceuticals (Roche down 2.8%, GSK down 1.3%). The energy sector, however, has shown resilience with Shell up 1.4% and BP up 2.0%.

Corporate News

Roche and Zealand Pharma's experimental obesity drug has disappointed investors, achieving only a 10.7% weight loss after 42 weeks. This led to a record 32% drop in Zealand's shares and a 3.3% decline in Roche's stock. Analysts are skeptical about the drug's potential to become a leading treatment in a competitive market despite its minimal side effects.

Currencies

The US Dollar Index has increased by 0.3%, reaching its highest level since December 2025. The euro has suffered the most, with the EUR/USD pair down 0.4% to 1.156. Other safe-haven currencies, including the Swiss franc and Japanese yen, have also seen slight gains against the dollar.

Commodities

Gold prices have continued to decline, down 0.2% to $5,070, influenced by the strengthening dollar. In contrast, oil prices have surged, with Brent crude rising 5.7% to nearly $89 per barrel and WTI increasing by 8.7% to nearly $86 per barrel.

Economic and Political Context

The Eurozone's GDP growth has been revised down from 1.3% to 1.2% year-on-year. The growth was supported by household consumption, government spending, and fixed capital investment, but was hindered by falling exports and negative inventory contributions.

Federal Reserve Commentary

Christopher Waller from the Federal Reserve commented on the potential impact of the ongoing conflict in Iran, suggesting that while it may not lead to long-term inflation, an energy price shock could pose challenges for the Fed.

US-Iran Conflict

President Trump has warned Americans to prepare for potential Iranian attacks, emphasizing the goal of regime change in Iran. He has indicated that he has specific candidates in mind for a new leadership role in Iran.

EU Response

EU leaders, including Ursula von der Leyen and Antonio Costa, are set to meet with Gulf leaders to address the escalating conflict in the Middle East, with concerns over energy and migration crises. Meetings in Cyprus have been canceled due to these threats, and aid to the region is being increased.

Energy Security

The German Minister for Economic Affairs has assured that energy markets remain liquid and secure, despite the shutdown of LNG production in Qatar, which has contributed to the euro's decline due to the region's sensitivity to commodity prices.