EMEA Morning Briefing : Traders Assess Middle East Conflict

MARKET WRAPS

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EU retail trade; France industrial production; trading updates from Deutsche Post, Merck, Universal Music Group, Prada, Reckitt Benckiser, Rentokil Initial, Aviva, ITV, Galderma, Entain, Harbour Energy, Serco Group, Endeavour Mining, Taylor Wimpey, Admiral Group

Opening Call:

European stock futures traded mixed early Thursday. Asian stock benchmarks rebounded; the dollar rose; Treasury yields edged higher; while oil and gold futures advanced.

Equities:

Stock futures were mixed early Thursday, as the conflict in the Middle East continued to expand well beyond Iran and risks pulling in America's NATO allies. Defense Secretary Pete Hegseth in a news conference put a longer time frame on the war, saying it could last as long as eight weeks.

In Washington, the Senate rejected a resolution that sought to limit President Trump's ability to conduct military operations against Iran without congressional approval. The White House said Trump is discussing with advisers what the U.S. role in Iran will be after the military conflict ends.

Meanwhile, Asian equities rebounded, tracking gains by U.S. indexes overnight. Appetite for risky assets improved on the back of strong U.S. economic data released overnight.

Goldman Sachs said correction risks are high given the elevated valuation of global equities, but the Middle East conflict isn't likely to send markets into a bear market.

Forex:

The U.S. Dollar Index has gained this week, signaling a change of heart around the greenback. It lost ground with investors after Trump shocked the world last year with his "liberation day" tariffs.

Yet a stronger dollar during a time of combat suggests interest in one of the U.S.'s biggest exports.

"In currencies, the dollar has value for a more traditional reason: You're going to need to fund things, buying armaments, and since we are the largest purveyor of those, you probably want dollars," said Bob Savage, head of markets macro strategy at BNY.

Bonds:

The U.S.-Israeli attacks against Iran have halted a weekslong rally in U.S. government bonds, pushing the yield on the 10-year Treasury note back above 4% and threatening higher borrowing costs for businesses and consumers.

Now, again, "you're seeing more of that prolonged inflation impact and less of your typical risk-off flow," said Zach Griffiths, head of investment-grade and macro strategy at CreditSights.

Energy:

Oil gained in Asia on prospects of prolonged supply disruptions driven by the Middle East conflict. "The U.S. has signalled a four- to five-week campaign, Iran is seeking to regionalise the conflict and the crucial Strait of Hormuz chokepoint is effectively shut," Tradu.com's Nikos Tzabouras said.

These developments could overturn previously unfavorable supply-demand dynamics, lifting crude oil prices and bringing the $100/bbl level into focus, the analyst added.

Metals:

Gold rose early Thursday amid the ongoing Iran conflict. "Investors remained focused on the evolving geopolitical landscape, which continues to reinforce gold's appeal," Tickmill's Joseph Dahrieh said.

Tensions in the Middle East as well as in Eastern Europe could continue to send investors toward safe-haven assets, he said.

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Aluminum continued to extend gains amid tight supply stemming from the Middle East conflict. Aluminium Bahrain BSC suspended deliveries to some customers under a force majeure clause, ANZ said. Outbound shipments have also been hurt by an effective halt on voyages through the Strait of Hormuz.

TODAY'S TOP HEADLINES

China Signals New Era of Slower Economic Growth

China signaled that the world's second-largest economy is entering an era of slower expansion, setting a target for gross domestic product growth of between 4.5% and 5% this year.

It is the lowest target set since at least the 1990s and follows three years in which officials called for growth of "around 5%." If China's economy were to expand at a pace below 5% this year, it would be the slowest growth reported by the country in more than three decades, other than during the Covid-19 pandemic years.

The Iran conflict could feed a defense boom. Why a rearming world needs more dollars.

Gold prices have whipped around and Treasurys sold off sharply, yet the dollar has climbed since the start of the Iran conflict.

On the fifth day of hostilities, with no end in sight, investors have been asking a more practical question: What's the ultimate way to ride out this particular storm? In a world where even safety has a price, the early answer in this conflict seems to be the U.S. dollar.

Broadening Mideast Conflict Risks Pulling In U.S.'s NATO Allies

Iranian strikes across the Mideast are risking drawing in a raft of America's NATO allies.

The U.K. and France have in recent days both said they would send additional warships to the region after an Iranian drone targeted a British military base in Cyprus.

Some European Leaders Are Now Openly Challenging Trump Over Iran

LONDON-For the past year, most European leaders took pains not to offend President Trump. The Iran conflict has brought a swift end to that honeymoon-for at least two leaders.

The leaders of Britain and Spain ratcheted up their war of words with the president on Wednesday, spelling out why they didn't back the U.S. attack on Iran, calling it both illegal and unwise.

Broadcom Sales Rise as AI Developers Build More Products and Agents

Broadcom posted higher sales in the latest quarter as the type and number of AI customers kept expanding.

AI revenue in the quarter more than doubled to $8.4 billion, driven by demand for custom AI accelerators and networking, Chief Executive Hock Tan said. Demand is now coming from both hyperscalers and regular companies looking to build out their own AI agents, he told investors on a call Wednesday.

Apple Uses Low Prices to Attack Rivals During Memory-Chip Crunch

Spiking memory prices will devastate the electronics market this year, analysts say. Apple's pricing strategy for its newest devices suggests it wants to exploit others' pain for its own global market-share gains.

When the company on Monday announced its new entry-level iPhone, the 17e, it set the starting price at $599, the same as last year's model. And on Wednesday it announced the entry-level MacBook Neo laptop at $599, a lower price than some analysts had expected. The low prices come despite the rising cost of memory and storage inside the devices, which could eat into Apple's profit.

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Expected Major Events for Thursday

06:45/SWI: Feb Unemployment

07:30/HUN: Jan Retail Sales

07:45/FRA: Jan Industrial production index

08:00/AUT: 4Q GDP

08:00/SVK: Jan Internal trade, incl Wholesale & Retail

08:00/SPN: Jan Industrial Production

09:00/UK: Feb UK monthly car registrations figures

09:00/ITA: Jan Retail Sales

09:30/UK: Feb S&P Global UK Construction PMI

10:00/MLT: Jan Registered Unemployed

10:00/CRO: Jan Retail trade

10:00/EU: Jan Retail trade

10:00/CYP: Feb CPI

11:00/IRL: 4Q GDP

11:00/IRL: 4Q Balance of Payments

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

03-05-26 0015ET