European chip stocks slide as sovereign bond yields stay in focus

Macro & central banks

• Bank of France Governor Emmanuel Moulin said the bank makes its decisions meeting by meeting, driven mainly by incoming data. He argued that the sharp rise in long-term sovereign yields is tightening financial conditions.
• The selloff in French government bonds accelerated this month, pushing long-term borrowing costs to their highest levels in decades. Investors are worried about political gridlock and the government's ability to control public spending.
• At the Bank of England, chief economist Huw Pill questions whether four 25 basis point hikes, priced by markets over the next year, are appropriate. He voted for a hike in September, but the majority of the committee, including Governor Andrew Bailey, held rates unchanged.
• UK Finance Minister John Healey reportedly plans to fund his first annual budget, due on 28/10, through tax rises or spending cuts rather than more borrowing. The war in Iran has added pressure on public finances and reduced his room for maneuver.

Semiconductors & European tech

• Soitec closed at 145.30 euros, down 5.95 percent, or 16.25 percent below its 6 October peak of 173.50 euros. The stock broke below an important bullish trendline on the daily chart. STMicroelectronics fell 3.80 percent.
• According to a Saxo Bank strategist quoted by AFP, the sector was hit by technology progress announced by China's CXMT. Investors read it as a sign that Western chipmakers' lead over China is narrowing, which was enough to trigger profit-taking.
• Before this session, Soitec was still up more than 500 percent year to date, after losing more than 13 percent over the week.

Stocks & geopolitics

• Eramet closed at 37.24 euros, down 14.43 percent, its lowest close since December 2020. The stock had already lost 3.97 percent on Monday. The group plans a 500 million euro capital increase in the fourth quarter, with preferential subscription rights maintained. The French state, through the APE, will subscribe for its 27.1 percent share and become the largest shareholder, while the market is penalizing the prospect of heavy dilution.
• Donald Trump announced a "massive" exploration for oil, gas and minerals in Greenland, without giving specifics. Direct impact on the indices looks limited for now.

What to watch today

• Remarks from Emmanuel Moulin and Huw Pill on the sidelines of the IMF meetings in Bangkok.
• Movements in French long-term yields, the main driver of sentiment in the European bond market.
• Reaction of European chip stocks after the drops in Soitec and STMicroelectronics.
• The UK budget scheduled for 28/10, outside today's session, although some of its trade-offs are already partly known.