EMEA Morning Briefing : Stock Futures Lower Amid Fragile Mideast Ceasefire

MARKET WRAPS

Watch For:

Germany foreign trade, industrial production; no major corporate trading updates expected

Opening Call:

European stock futures traded lower early Tuesday. Asian stock benchmarks were largely higher; the dollar and Treasury yields edged lower; while oil and gold futures fell.

Equities:

Stock futures point to a lower open in Europe on Tuesday amid a fragile Middle East ceasefire. Iran and Israel ended multiple exchanges of fire Monday but left open the possibility of resuming attacks.

"Geopolitical concerns eased after Iran and Israel agreed to halt further attacks following a weekend flare-up that threatened ongoing [U.S.-Iran] peace negotiations," Commerzbank Research said.

"While both countries warned they would retaliate if attacked again, investors interpreted the developments as reducing the risk of a broader regional conflict," the bank said.

Forex:

Iran and Israel ended multiple exchanges of fire Monday after President Trump called for them to stop their hostilities. Market sentiment has "steadied as both sides indicated a willingness to stop fighting for now, " NAB's Rodrigo Catril said. This has put "markets in partial recovery mode," he added.

Bonds:

Interest rate cuts by the Fed are more likely than increases, Citi said. Robust labor data and war-driven inflation acceleration drive the hawkish outlook.

Citi argues, however, that unemployment is bound to increase, becoming supportive of cuts. An eventual normalization of global oil trade that lowers crude prices "can lead to a rapid dovish repricing and help open the door to cuts," Citi said.

Energy:

Oil futures fell early Tuesday. The first direct strikes between Israel and Iran since the April ceasefire raised concerns of wider escalation, although "cooler heads appear to be prevailing to start the week," Arlan Suderman of StoneX said. Houthi threats against Israeli shipping in the Red Sea add risk, he said.

"With global commodity trade already facing notable logistical snares due to the ongoing closure of the Strait of Hormuz, a resumption in Houthi attacks in the Red Sea would add yet another layer of complexity."

Metals:

Increasing inflation concerns amid renewed geopolitical tensions in the Middle East could be reinforcing expectations of a more restrictive monetary-policy stance, said Somesh Kapuria at Hola Prime.

Any indication that the conflict could persist for longer may continue to support these inflation expectations and keep pressure on gold. However, ongoing central bank gold purchases could provide a degree of support to gold prices, he added.

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Copper prices are likely to stay stronger for longer than Jefferies thought. "We see copper supply deficit averaging 491,000 tons annually through to 2030," Jefferies said.

Metals account for 25% of manufacturing costs in white goods and electric vehicles. So, a 25% increase in copper/metals prices lifts total manufacturing costs by 5%-6% and adds 3% to data-center build costs, the bank added.

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Iron ore fell in Asian trading. Underlying demand for iron ore remains weak, ANZ said, adding that it sees little chance of the structural decline in steel demand reversing without targeted policy support from China.

Furthermore, weak consumption in China and high existing inventory levels continue to push prices down. ANZ expects oversupply pressures to intensify as production from Australia and Brazil expands and new mining projects come online.

TODAY'S TOP HEADLINES

Wall Street Is Rushing to Fund the AI Bonanza in Every Conceivable Way

Funding rounds and IPOs raising 11-figure sums. Blockbuster bond sales spanning three continents. The casual announcement of an $85 billion equity raise.

Such is life on Wall Street at the dawn of the artificial-intelligence build-out. Tech companies are hungry for cash to invest in data centers, and investors are forking it over through all possible means, in all parts of the globe-a flurry of fundraising that has mostly supported markets by powering technological advances, even as it tests their ability to absorb it all.

Iran and Israel Halt Exchanges of Fire

TEL AVIV-Iran and Israel ended multiple exchanges of fire Monday but left open the possibility of resuming attacks that pressured President Trump's fragile Middle East ceasefire.

Trump had intervened in the violent, hourslong back-and-forth, saying Israel and Iran must immediately stop "shooting" and declaring that both countries wanted an immediate ceasefire.

Germany Drops Jet Project With France in Setback for European Defense Sovereignty

Germany has pulled out of a stalled stealth-fighter project with France and Spain whose lack of progress has become a symbol for the hurdles Europe faces in rebuilding its militaries as the U.S. reduces its presence on the continent.

Berlin will no longer pursue building and ordering the aircraft after failing to resolve a spat between Airbus and Dassault Aviation over which should take the lead on its development, a senior German government official said.

Lebanon Is Teetering at the Abyss of a New Civil War

BEIRUT-The government of Lebanon is barely able to manage the basic requirements of statehood. It can provide electricity for only a few hours a day, and people avoid its flattened currency in favor of dollars. Its military is only the second-most-powerful force in the country after Hezbollah-or the third counting Israel, which has been expanding its monthslong occupation.

But it is now being pressed by the U.S., Israel and many of its own people toward a confrontation with Hezbollah that risks tilting the country into a new civil war.

University Endowments Are About to Strike It Big on the SpaceX IPO

Elon Musk has been critical of U.S. universities. Right now, the feeling isn't mutual.

SpaceX is among the most widely held investments across colleges and universities, endowment executives say, likely making the rocket company's coming IPO one of the great windfalls for American endowments.

OpenAI Files to Go Public in Test of Investor Appetite for Top AI Startups

OpenAI, which kick-started the artificial-intelligence boom with the 2022 release of ChatGPT, is officially preparing to stage an initial public offering that will test investor appetite for AI companies.

The company led by Sam Altman confidentially filed IPO paperwork with the Securities and Exchange Commission, the startup said in a written statement. The filing sets up the company to potentially go public as soon as this fall, though OpenAI said it hasn't yet decided on timing.

U.S. Expands List of Chinese Tech Companies It Says Assist Beijing's Military

The Pentagon on Monday updated its list of Chinese businesses the U.S. has identified as aiding Beijing's military, designating around two dozen new companies, including tech giants Alibaba Group and Baidu, limiting their operations in America.

The list of Chinese military-linked companies, which the Defense Department revises annually, is an expansion from last year underscoring the view from U.S. national security officials that China leverages its private sector to build and improve military technology. New additions this year include a range of Chinese consumer and tech companies, including electric carmaker BYD, pharmaceutical firm WuXi AppTec and humanoid robotics company Unitree.

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Expected Major Events for Tuesday

04:30/NED: Apr Consumer Spending

04:30/NED: May CPI

06:00/FIN: Apr Foreign trade

06:00/GER: Apr Foreign Trade

06:00/DEN: Apr Industrial production & new orders

06:00/GER: Apr Industrial Production Index

06:00/DEN: Apr Balance of payments (provisional figures)

06:00/DEN: Apr External trade (provisional figures)

06:00/GER: 1Q Labour cost index

06:00/ROM: Apr International trade

06:00/NOR: May PPI

06:30/HUN: May CPI

07:00/AUT: Mar Foreign Trade

07:00/SVK: Apr Foreign trade

08:30/UK: 1Q Mortgage Lenders and Administrators Return (MLAR) statistics

09:00/CRO: Apr Foreign Trade

09:00/MLT: Apr International Trade

09:00/CYP: Apr Foreign Trade (provisional)

10:00/POR: Apr International trade statistics

10:00/IRL: Apr Industrial Production and Turnover

15:59/UKR: Apr Industrial Production

17:59/UK: 3Q Manpower UK Employment Outlook Survey

23:01/UK: May UK Nations and Regions Growth Tracker

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

06-09-26 0017ET