Investors looked ahead with anticipation to the US consumer price data due in the afternoon. US inflation is expected to have risen to 4.2 percent in May, more than double the Federal Reserve's target. The focus is also on the European Central Bank's (ECB) interest rate decision on Thursday. Economists and financial market experts firmly expect policymakers to raise the deposit rate from 2.0 to 2.25 percent on Thursday - the first such hike in nearly three years.
WAITING FOR THE REOPENING OF THE STRAIT OF HORMUZ
In the crude oil markets, renewed tensions between Iran and the US caused only a temporary spike in prices. After an initial rise of up to two percent, Brent North Sea crude and US light crude (WTI) each eased by around half a percent to 91.07 dollars and 87.75 dollars per barrel, respectively. The US launched airstrikes against Iran on Tuesday after Tehran, according to US President Donald Trump, shot down an American combat helicopter in the Strait of Hormuz.
However, traders focused on earlier remarks by Trump suggesting that an agreement to reopen the Strait of Hormuz was nearing completion. 'We remain optimistic that a deal will be reached in the coming weeks, even if it is only a compromise that at least gets shipping traffic through the strait moving again,' said Mohit Kumar, Chief European Economist at Jefferies. 'Neither the US nor Iran wants to resume a full-scale war, so we hope that the ceasefire, however fragile it may be, will ultimately hold.'
TECHNOLOGY SECTOR REMAINS UNDER PRESSURE
The cautious recovery attempt in the technology sector had already stalled the previous day. The broader European tech sector declined by around one percent. The biggest loser on the Dax was software group SAP, with its share price sliding by up to four percent. Sharp swings in AI stocks caused high volatility in US and Asian markets this week. Due to the lower weighting of tech stocks, the impact in Europe remained limited.
Among the gainers on the Dax were Adidas shares, which rose by two percent at one point after RBC analysts upgraded their recommendation to 'Outperform' from 'Sector Perform'. They justified the move by citing revenue growth through direct sales and the consistent execution of strategy. 'Adidas' earnings outlook is at the upper end compared to other sporting goods manufacturers, and the current valuation offers upside potential as the market better assesses the sustainability of growth.'
A positive analyst note also boosted Fielmann shares. The optical chain's stock surged by more than seven percent after Deutsche Bank initiated coverage with a 'Buy' rating. This puts the stock on track for its largest daily gain in over a year. 'Under the leadership of Marc Fielmann, the second-generation CEO, the company has successfully implemented its transformation under the Vision 2025 framework, achieving revenue growth of nearly one billion euros compared to 2018 and a significant increase in profitability,' the analysts noted.
(Report by Stefanie Geiger, edited by Sabine Ehrhardt. For inquiries, please contact our editorial team at berlin.newsroom@thomsonreuters.com (for politics and economics) or frankfurt.newsroom@thomsonreuters.com (for companies and markets))
