EMEA Morning Briefing : Stock Futures Fall After New Mideast Clashes

MARKET WRAPS

Watch For:

ECB decision; trading update from Halma

Opening Call:

European stock futures fell early Thursday. Asian stock benchmarks declined; the dollar and Treasury yields were little changed; oil rose; while gold fell.

Equities:

Stock futures point to a lower open in Europe on Thursday after the U.S. began a fresh wave of attacks on Iran.

The attack came hours after Trump said Iran was "playing us for suckers" because it hadn't accepted U.S. terms for a nuclear deal. The U.S. military announced the strikes were over around 9 p.m. Eastern time on Wednesday, several hours after they began.

Meanwhile, markets are also looking ahead to the European Central Bank's rate decision. The ECB is likely to raise interest rates, a move that could foreshadow similar action from the Federal Reserve and other central banks as policymakers grapple with rising inflation.

"The real focus of this week's meeting is on what communication may convey about future policy moves," said Citi analyst Arnaud Marès, who expects the central bank to hike again at its next meeting in July.

Forex:

The U.S. dollar is likely to stay bid on safe-haven demand, DBS Group Research's Chang Wei Liang said.

"Ominously, Trump warned Iran that it will 'pay the price' for dragging out talks, and his rhetoric could mark a restart of forceful U.S. military actions," DBS said. "There is an acute risk of more tit-for-tat responses that will leave the ceasefire in tatters."

Bonds:

"To get the job, obviously, [Fed Chairman] Warsh made this argument that there is a productivity revolution in place," said Brij Khurana, fixed-income portfolio manager at Wellington Management. "It would be concerning to the bond market if that's the focus of his discussion compared to talking about shorter term inflation being a risk." He needs to "create like a bona fide inflation-fighting mind-set," Khurana added.

The market has already begun pricing in the probability that the Fed will move to lift short-term interest rates later this year and next year.

Energy:

Iran's response in the next 12 hours to the latest U.S. attacks is poised to be closely watched by oil-market participants, CBA's John Oh said. An "Iranian retaliation risks further escalation and would challenge the market's apparent assumption that U.S.-Iran deal will imminently be reached," he said.

The exchange of attacks between the U.S. and Iran "raises the risk that the conflict escalates, increasing upside risks to oil prices as probability of a near-term U.S.-Iran deal decline," Oh added.

Metals:

Gold fell early Thursday. While the U.S. CPI reading was in line with expectations, investors remain concerned about the inflationary effect of the sharp rise in energy prices due to the ongoing Middle East conflict, said XS.com's Antonio Di Giacomo.

A significant portion of the market now considers the next Fed rate increase to be possible before the year ends, which is likely weighing on the precious metal's prices, he said.

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Base metals have come under broad selling pressure as escalating tensions in the Middle East once again weigh on investors' risk appetite, ANZ said. Traders also appeared focused on tighter global liquidity after last week's strong U.S. employment data spurred interest rate hike expectations.

Still, ANZ said the long-term demand outlook for base metals remains intact.

TODAY'S TOP HEADLINES

U.S. Launches Fresh Wave of Strikes Against Iran

WASHINGTON-The U.S. began a fresh wave of attacks on Iran Wednesday, launching strikes against multiple targets on President Trump's orders, the American military said.

The attack came hours after Trump said Iran was "playing us for suckers" because it hadn't accepted U.S. terms for a nuclear deal. The Pentagon cast the attacks as an act of coercive diplomacy designed to force Iranian concessions at the negotiating table.

ECB Rate Hike Looks Likely as Inflation Rises. The Fed Could Follow.

The European Central Bank is likely to raise interest rates on Thursday, a move that could foreshadow similar action from the Federal Reserve and other central banks as policymakers grapple with rising inflation.

The ECB hasn't hiked since September 2023, but investors and economists believe it will tighten now to address price pressures. Euro-zone inflation climbed to 3.2% in May, driven higher by the Iran war.

The Debate-Loving German Telecom Exec Plotting a Blockbuster Merger

Timotheus Höttges is about to embark on the most ambitious test of his professional career: trying to push through the largest public-company merger in history.

Höttges already runs Deutsche Telekom, the West's largest telecommunications company with 273 million mobile customers in 50 countries and a 54% stake in T-Mobile US. Now, he is reportedly looking to marry the straight-laced German firm with its flashy American offshoot.

OpenAI Considers Drastic Price Cuts, Anticipating War for Users With Anthropic

OpenAI is considering drastically lowering the prices it charges users as it seeks to win customers from its rival Anthropic.

The company is weighing significant cuts to what it charges for tokens, the unit of measurement artificial-intelligence firms use to bill for their products, according to people familiar with the matter. The move would be in anticipation of similar cuts the company expects at Anthropic, the people said.

Anthropic's New Fable AI Model Is Met With User Backlash Over Restrictions

Anthropic is finally giving the public a taste of its next-generation model, but its blunt safety barriers are angering some artificial-intelligence developers and users-and feeding a growing debate over who should be the keeper of dangerous AI capabilities.

Dubbed Claude Fable 5, the new model that Anthropic released Tuesday, is an update to the Mythos model that the company said was too dangerous to release widely. That model spooked government officials and cybersecurity experts for its potential to find unknown vulnerabilities in software used around the globe. But Fable comes with broad restrictions Anthropic says are aimed at kneecapping its dangerous abilities.

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Expected Major Events for Thursday

06:00/SWE: May CPI

08:00/BUL: Apr Trade with third countries - preliminary data

08:00/BUL: Mar Trade with EU Member States - preliminary data

08:30/UK: 1Q Business Finance Review

09:00/MLT: Apr Industrial Production Index

10:00/FRA: Apr OECD Harmonised Unemployment Rates

10:00/IRL: May CPI

11:00/TUR: Turkish interest rate decision

12:15/EU: ECB interest rate announcement

15:59/UKR: 1Q GDP

16:59/GER: Apr Balance of Payments

16:59/AUT: Jun OPEC Monthly Oil Market Report

23:01/UK: May Scottish Retail Sales Monitor

All times in GMT. Powered by Onclusive and Dow Jones.

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This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

06-11-26 0016ET