Euro zone bond yields held near multi-year highs on Tuesday, as investors weighed a range of mixed factors; From rising energy prices to political uncertainty in Germany and volatility in Japan, ahead of the European Central Bank meeting this week.
There was no significant change in the 10-year German bond yield, the benchmark for the euro zone bond market, at the beginning of trading, settling at 3.38 percent, near its highest level in 15 years that it recorded last week, according to Reuters.
The European Central Bank meeting on Thursday is the most prominent milestone for the euro zone bond market this week. The European Central Bank is widely expected to raise interest rates, while investor interest is focused on whether it will provide any signals about the course of monetary policy in the coming period.
High energy prices
At the same time, investors face a range of developments that may impact inflation expectations and interest rates; Among them is the continuing rise in energy prices. The price of Brent crude is approaching $100 per barrel, while wholesale gas prices in the Netherlands are approaching their highest levels since late 2022.
In Germany, the state of political uncertainty increased after the far-right Alternative for Germany party achieved a historic victory in state elections over the weekend, adding a new factor to the political scene in the largest economy in the euro zone.
European bond movements
Other euro zone bond yields generally moved in line with benchmark German bonds.
The French 10-year bond yield settled at 4.25 percent, near its highest levels since 2008, while the Italian bond yield fell one basis point to 4.20 percent.
Short-term bond yields also fell slightly; The two-year German bond yield fell one basis point to 2.98 percent.
European stocks fell slightly during trading on Tuesday, in light of the escalation of inflation fears due to the rise in oil prices, and concerns about energy supplies as the conflict continues in the Middle East, while “Novartis” shares came under strong pressure after the Swiss company announced the second setback in the development of its drugs.
The European Stoxx 600 index fell by 0.2 percent to 648.41 points by 07:05 GMT. The German DAX index fell by 0.3 percent, while the British Financial Times 100 index stabilized, and the French CAC 40 index fell by 0.4 percent, after a relatively quiet session on Monday, due to an official holiday in the United States, according to Reuters.
Novartis suffers sharp losses after a drug setback
Novartis shares fell by 8.8 percent, after the Swiss pharmaceutical company announced that clinical trials in the final stages of the drug “Del-Desiran”, intended to treat myotonic dystrophy, did not achieve its main goal.
This setback comes after the company announced on Monday that its experimental cholesterol-lowering drug, belacarsen, had failed to achieve positive results during an advanced clinical trial, which increased pressure on the company's stock.
Rising oil brings back inflation fears
Oil prices rose, with Brent crude futures trading at about $98.5 per barrel. Security tensions have raised concerns about the security of global energy supplies, at a time when rising crude prices may lead to increased inflationary pressures and complicate central banks' decisions on interest rates.
Sandoz rises and “Post Italia” strengthens its offer for “Telecom Italia”
In terms of individual stocks, Sandoz shares rose by 2.9 percent after the Swiss pharmaceutical company announced that it aims to double its net sales during the period from 2025 to 2035.
In Italy, Post Italian improved its offer to acquire Telecom Italia, in an effort to enhance its chances of controlling the telecommunications company that had previously monopolized the telephone market in the country. Post Italian shares fell by 0.2 percent.
Shipping disruptions and rising shipping costs are prompting building materials companies in Saudi Arabia to reconsider their supply chains, at a time when growing domestic demand provides an opportunity to expand the production and supplier base within the Kingdom.
In this direction, Masdar, which specializes in trading and distributing building and construction materials in Saudi Arabia, is focusing its expansion on the local market, aiming to raise the share of locally manufactured products to 80 percent of its sales by 2030, compared to about two-thirds currently, while enhancing its ability to confront fluctuations in global supply chains.
This trend comes in the wake of the Public Investment Fund becoming a partner in Masdar last year, acquiring 30 percent of the company through a capital increase and subscription to new shares, to support its expansion, develop its operations, and enhance its presence in the Saudi market.
Masdar’s CEO, Faisal Al-Muhaidib, said in exclusive statements to Asharq Al-Awsat that the company is giving priority to the Saudi market during the next stage, describing it as “promising,” and that local growth opportunities make focusing within Saudi Arabia the most appropriate option for the company at the present time, rather than expanding outside it.
Unrest enhances the localization bet
Despite the pressures imposed by navigation disturbances on trade movement and the rise in shipping costs, Al-Muhaidib said that their impact on Masdar’s operations was present, but limited, explaining that the company was able to shift its supply chains to the Red Sea ports.
He pointed out that the rise in shipping prices was reflected in supply costs, and that this reflection represents at the same time an opportunity to enhance the localization of supply chains within Saudi Arabia, and reduce dependence on external supply paths, “more and faster.”
Masdar's approach comes within the framework of the new phase that followed the entry of the Public Investment Fund as a partner in the company last year, by acquiring 30 percent of it through a capital increase and subscription to new shares.
This step contributed to supporting the development of the company’s operations, enhancing technical and digital transformation, improving customer experience, and raising the efficiency of services, in addition to expanding operations and building new strategic partnerships, in a way that supports the role of suppliers and local companies in meeting the needs of the building materials market.
In this context, Al-Muhaidib stressed that Masdar’s strategy is based on three main pillars, the first of which is to support the building and construction materials industry, in a way that helps meet the growing demand for products and materials needed for projects in Saudi Arabia.
The second pillar is the localization of supply chains, as locally manufactured products currently constitute about two-thirds of the company’s sales, while it aims to raise its share to 80 percent by the end of 2030.
The third pillar is to improve the customer experience by developing building materials stores and improving the services provided in them, including organization, safety, air conditioning, parking, and fulfilling licensing requirements.
Al-Muhaidib believes that developing the customer experience represents an important aspect of the company’s strategy, in light of the need to raise the level of services in the building materials market, and transform the process of purchasing products into a more organized and easier experience.
Housing drives demand
At the level of demand, Al-Muhaidib identified housing, hospitality, and industry as the most prominent sectors witnessing growth in their needs for building materials in the Saudi market. He said that the housing sector represents one of the most important sources of demand, while the hospitality sector is gaining increasing importance with the expansion of tourism activity, the increase in the number of visitors, and the development of hotels, facilities, and facilities related to tourism.
He also pointed to the industrial sector as one of the company's main focus areas, with the expansion of investments and industrial facilities in Saudi Arabia, and the accompanying demand for construction materials and equipment.
The launch of “Masdar” dates back to 1971, and the company works in the trade and distribution of building and construction materials in the Saudi market, through a diverse portfolio that includes iron, wood, plumbing materials, electricity, insulators, adhesives, chemicals, tools, fasteners, and others.
The company operates 109 branches in 29 cities in Saudi Arabia, and serves multiple sectors of customers in the fields of building and construction, industry, and trade.
