- During Wednesday’s session, European markets are catching up on the declines seen in U.S. indices, which experienced a significant correction yesterday.
- Market sentiment is clearly negative, even though the flow of company news is limited. This can be interpreted as meaning that companies (especially U.S. ones) have been providing the fuel for market gains, while the geopolitical and economic backdrop is exerting downward pressure.
- Declines in Europe are fairly deep, averaging around 1%. The biggest loser is the WIG20, down about 1.4%. The main indices in Switzerland, Spain, and Italy are performing better, with losses limited to around 0.5%.
- The broader market remains in a state of nervous anticipation. The main sources of uncertainty for Europe are the further trajectory of the conflict in Iran and -related to that, the future policy stance of the ECB.
- The market is currently pricing in as many as two ECB rate hikes in 2026. Any surprise could push Old Continent indices either higher or lower.
- STMicro (STM.IT) – Reported results above market expectations. Despite a decline in profit, revenue growth and forecasts of higher demand related to AI infrastructure are lifting the stock by 15%.
- Sanofi (SAN.FR) – The company has completed work on the drug Rilliprubart. Shares are down more than 1.5%.
- HSBC (HSBA.UK) – JP Morgan highlights the bank’s problems in China. Shares are down 2%.
- SAP (SAP.DE) – Shares are down more than 4% after a Goldman Sachs report pointing to margin pressure from component pricing.
- However, the absolutely key event will be the U.S. inflation data, published 1.5 hours before the Wall Street session opens. The market expects headline consumer inflation to rise to 4.2% and core inflation to 2.9%. Any surprise could trigger a strong market reaction.
- The large gap between core and headline inflation further underscores the strong contribution of energy and food to price growth.
- Futures tracking U.S. indices are showing slight declines ahead of the open, with losses in the 0.5-1% range.
- In the FX market, the British pound is strengthening the most. This follows the latest comments from the Bank of England, which the market interpreted as relatively hawkish. Gains are reaching about 0.25% against major currency pairs.
- Overnight, Iran reportedly shot down a U.S. “Apache” attack helicopter patrolling the Strait of Hormuz. The U.S. responded with a retaliatory strike on Iranian territory.
- Donald Trump commented that “Iran will pay the price for waiting too long.”
- Despite the escalation, the oil market remains flat. Precious metals are also declining.
- Wheat is gaining. Contracts are up 2% amid concerns about supply in the U.S.
- Pessimism also dominates the cryptocurrency market. Bitcoin is falling to the $60,000 level.
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