LIVE MARKETS-Stocks poised for next leg higher... if oil drops

By Reuters News

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STOCKS POISED FOR NEXT LEG HIGHER... IF OIL DROPS

European shares look set to close out Q3 almost exactly where they started, with September, typically the worst month for the STOXX 600, notching a near 2% decline.

But Barclays notes that, historically, things tend to go better from here.

"Equities have followed seasonal patterns, with negative returns and narrower breadth in September. Positive Q4 seasonality and midterm dynamics typically argue for a rebound," write Barclays equity strategists led by Emmanuel Cau.

One risk still looms large: oil. Brent crude still holds above $103 per barrel, and while recent signs of progress towards ending the war are encouraging, energy supplies remain severely disrupted.

"A US-Iran breakthrough would materially boost both stocks and bonds," writes Cau.

"But the risk of higher-for-longer oil looks more priced in bonds than in equities."

In other words, a sustained drop in oil prices could help clear the way for the typical seasonal year-end rally, while persistently elevated crude prices remain a key risk for stocks.

(Samuel Indyk)

EARLIER ON LIVE MARKETS:

STOXX SET FOR MONTHLY FALL, BUT A STEADY QUARTER CLICK HERE

BEFORE THE BELL: SET TO END THE MONTH ON A HIGH NOTE CLICK HERE

A CRUEL QUARTER FOR BONDS CLICK HERE


Seasonality STOXX https://fingfx.thomsonreuters.com/gfx/mkt/byvrakgbjpe/Pasted%20image%201790761382348.png

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