MARKET WRAPS
Stocks:
European shares were struggling for direction on Wednesday after an escalation in geopolitical tensions and ahead of the European Central Bank meeting tomorrow.
U.S. forces have resumed strikes against Iran in retaliation for the downing of a U.S. helicopter near the Strait of Hormuz. On Wednesday, Tehran said it attacked bases in Bahrain, Jordan and Kuwait.
"The latest escalation threatens to prolong restrictions on traffic through the Strait of Hormuz, a critical route for global oil and gas exports, while declining U.S. crude inventories underscore tightening supply conditions," MUFG said.
Investors are now awaiting the ECB meeting on Thursday, where a rate hike "looks like a done deal," according to Carmignac. The debate is no longer whether the ECB will tighten monetary policy, but how far and how fast,
it added. Carmignac's baseline scenario remains for two additional rate hikes before the end of the summer.
With inflation expected to remain stickier than anticipated, particularly across Europe and the U.K., Franklin Templeton also expects the ECB to raise rates this Thursday, with a further hike likely around September.
"The ECB needs to act more decisively
to contain both primary inflationary pressures and their secondary effects, and we believe it will do so."
The market is almost fully pricing in a 25 basis-point rate rise on Thursday but isn't expecting back-to-back increases, LSEG data show.
Stocks to watch
Castlelake 's interest in easyJet shouldn't be taken lightly, Deutsche Bank said. The investment firm already has a direct commercial relationship with easyJet, owning a 2.14% stake in the U.K. discount carrier.
Electrification remains a stronghold for Schneider Electric , making it more resilient compared to peers, AlphaValue said.
WH Smith
needs to rebuild credibility with the market, RBC Capital Markets said. The seller of stationery, books and magazines in airports and train stations reported a softer-than-expected third quarter in its performance update.
U.S. Markets:
Stock futures were down after the U.S. launched strikes on Iran Tuesday evening and as investors await inflation data.
The consensus forecast by economists in a WSJ poll is that U.S. annual headline inflation rises to 4.2% in May, from 3.8% in April.
A higher-than-expected inflation reading could cause turmoil "given how febrile markets have been recently", Deutsche Bank said.
Forex:
The euro rose. The currency could rise if the ECB raises interest rates Thursday and leaves the door open to another move in July, ING said.
The dollar fell slightly as investors turned cautious ahead of U.S. inflation data later in the day.
Bonds:
Eurozone government bond yields were little changed as markets' prime focus is on the ECB's policy meeting on Thursday, with a 25-basis-point rate hike being fully priced.
Wider eurozone government bond yield
spreads stand out as the most consistent seasonality pattern between now and end-August, Citi said.
Treasury yields rose in early trade after renewed U.S.-Iran military escalation Tuesday.
The two-year segment of the Treasury curve looks attractive with yields having increased, Russell Investments said.
Germany's five- and 10-year government bond yields are attractive
around current levels, Neuberger said. It doesn't expect risk in investing in euro bonds as the ECB should fight against any inflation risk.
The front end of the European rates market is increasingly attractive, said Carmignac. "With markets already pricing close to three hikes in 2026, a significant portion of the tightening cycle appears reflected in short-dated European sovereign bonds ."
Energy:
Oil prices edged higher
in early trading after the U.S. launched military strikes against Iran. "Going forward, developments in US-Iran negotiations, security conditions around Hormuz, and the pace of inventory drawdown will be key drivers of oil market sentiment," MUFG said.
Metals:
Gold prices remained under pressure amid geopolitical risks and expectations of firmer inflation in the U.S., Phillip Nova said.
William Blair said gold still has catalysts
despite near-term weakness. While the yellow metal has been an underperformer this year, it still serves as a structural reserve diversifier, even amid elevated geopolitical uncertainty.
Copper
Copper fell in early trade. Renewed tensions in the Middle East are weighing on the metal, ANZ Research said.
Iron
Iron ore was higher in early trade, after falling from its recent peak levels. Prices are likely to remain range-bound in the near term, according to Nanhua Futures.
EMEA HEADLINES
ECB to Keep Guard Up Despite Muted Signs of Inflation Spiral
The European Central Bank is set to raise interest rates for the first time in nearly three years on Thursday as higher energy prices spill over into broader inflation pressures, but economists say signs of second-round price effects remain limited for now.
Eurozone inflation accelerated to 3.2% in May, while core inflation-which strips out volatile energy and food prices-unexpectedly rose to 2.5%, suggesting the shock from higher oil prices due to the war in the Middle East is beginning to spread beyond energy markets.
UniCredit Says Commerzbank Stake Increased to 37.7% After Latest Acceptances
Italy's UniCredit said its direct stake in Germany's Commerzbank amounts to 37.7% after more shares were tendered to its takeover bid, with one week to go for the close of the offer period.
UniCredit received valid acceptances for its offer for Commerzbank of 10.9% as of Tuesday, which add to its existing direct stake of 26.8%, according to a regulatory filing published by the Italian bank. UniCredit also holds financial contracts that give it exposure to an additional 16.4% stake in Commerzbank, according to the filing.
Sanofi to Stop Late-Stage Study of Immune-Disorder Drug
Sanofi said it would stop a late-stage study of an experimental treatment for a rare immune disorder after concluding the drug was unlikely to deliver sufficient efficacy.
The French drugmaker said Wednesday that it would consider whether to continue other studies for the drug, riliprubart, currently under way.
New GSK CEO's Cancer Deal Signals Bigger Ambitions
Not long ago, it would have been hard to imagine GSK doing one of the industry's biggest deals of 2026.
But the company's new chief executive, Luke Miels, is taking a starkly different approach from his predecessor, striking a $10.6 billion deal for cancer drugmaker Nuvalent on Tuesday, in an attempt to turn the drugmaker into a more formidable competitor in an industry where it had started to fall behind.
GLOBAL NEWS
The Corners of the Market Where Investors Are Riding Out Turbulence in Chip Stocks
The nascent rebound in tech stocks ended in a lurching drop on Tuesday, with the Nasdaq composite losing about 1% in its largest blown gain since early January.
The slide extended a bout of volatility that has raised worries that stocks' record run is rooted in the staggering gains of a handful of chip companies. Some fear that a narrow rally won't survive pressure expected from higher interest rates, worries about the AI trade and the pending avalanche of new tech shares that kicks off Friday with the massive SpaceX public offering.
U.S. Launches Strikes on Iran in Response to Downed Apache Helicopter
The U.S. launched military strikes Tuesday against Iran in retaliation for the downing of a U.S. Apache helicopter near the Strait of Hormuz, according to U.S. Central Command.
The strikes, which lasted several hours and which the military said were carried out in self-defense, were directed by President Trump.
China's Producer Inflation Gains Pace as Mideast War Fuels Higher Prices
China's factory-gate inflation accelerated in May as the ongoing conflict in the Middle East continued to drive up energy and commodity costs.
The producer-price index jumped 3.9% from a year earlier in May, accelerating from a 2.8% increase in April, according to data released Wednesday by the National Bureau of Statistics. The figure surpassed the 3.7% increase projected by economists in a Wall Street Journal survey.
Is the Iran War Killing Global Oil Demand-Forever?
Oil analysts have been scratching their heads for months about why prices haven't risen more. Brent crude has been hovering around $91 a barrel, despite the world experiencing its worst supply disruption ever because of the Iran war.
One explanation has been gaining traction, though, and it's bad news for producers: The world may be figuring out how to get by with less oil.
The World's Great Powers Are Learning They Have Limits
Great powers, it turns out, don't have as much power as they thought.
After taking office last year, President Trump unapologetically pushed a might-makes-right vision to remake the international order around a U.S. sphere of influence, a worldview not that dissimilar from Russia's or China's. The future seemed shaped by an oft-repeated line from ancient Greek historian Thucydides: "The strong do what they will, and the weak suffer as they must."
Europe Has Learned Silence Can Be Golden in Trump Trade Spats, Top EU Legislator Says
The European Union has learned to be "the boring partner" in a relationship with the U.S. newly marked by disagreements over trade tariffs, the president of the European Parliament said, noting the importance of stability in the multitrillion-dollar trading partnership.
"We've learned not to react emotionally to every public utterance, but rather rely on the fact that boring is good and we can be the boring part of the relationship" with the U.S., Roberta Metsola told The Wall Street Journal's Gordon Fairclough during an interview at the WSJ Leadership Institute CEO Summit.
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06-10-26 0518ET
