MARKET WRAPS
European stocks were largely down, set to lose further ground from Tuesday's lower close, as investors Wednesday confronted the prospect of drawn-out brinkmanship in the Middle East.
President Trump on Tuesday extended the cease-fire with Iran but peace talks, which were expected this week, appear to be in a state of limbo and broke down before they could even begin.
The uncertainty hanging over the peace process in the region didn't appear to initially weigh on Europe's top indexes. Technology and energy-sensitive industrial stocks led the charge at the opening bell, but the CAC 40 and the DAX were in negative territory as they approached midday. So too were the Europe-wide Stoxx 600 and the FTSE 100.
Trump said the U.S. would maintain its blockade on Iranian ports in the interim, and Commerzbank affirmed its expectation for a prolonged, unstable stalemate with shifting deadlines.
Iran's envoy to the United Nations, meanwhile, said his country was ready for talks on the condition the U.S. ends its blockade.
Macquarie Group said denying Iran oil revenue could influence investors into thinking economic pressure on Iran might prove more fruitful , and lead to a quicker resolution, than a hot kinetic conflict.
That said, Iran attacked two vessels in the Strait of Hormuz within hours of each other Wednesday, according to U.K. Maritime Trade Operations.
DBS Group cautioned market volatility was likely to increase as both Iran and the U.S. attempt to strengthen their negotiation positions.
"We are wary of asymmetrical downside risks to risky assets if a deal does not materialize."
Elsewhere inflation in the U.K. rose , driven by higher energy prices due to the conflict in the Middle East and the EU's trade commissioner is scheduled to meet with U.S. Commerce Secretary Howard Lutnick on Wednesday to discuss the bloc's Trans-Atlantic trade deal.
Economic Insight
The European Central Bank will likely deliver two interest-rate rate increases in 2026, bringing the deposit rate to 2.50% , Danske Bank said, adding that the moves were expected "as inflation concerns outweigh growth concerns and [the ECB seeks] to curb long-term inflation expectations from de-anchoring."
U.S. Markets:
Stock futures pointed to a higher open, rebounding from Tuesday's session as Middle Eastern developments lifted stock volatility to its highest level since the start of the U.S.-Iran cease-fire.
Forex:
The euro rose against the dollar but gains could be limited without real progress towards an Iran peace deal, ING said.
"Tangible progress toward a deal--both on the military front and on Hormuz--is needed to keep the euro above $1.180."
The dollar fell slightly after President Trump said he would extend the cease-fire with Iran and after he added that the U.S. blockade of Iranian ports would continue until Iran presented a "unified proposal."
Sterling edged higher against the dollar and was flat against the euro, little moved after data showed U.K. inflation accelerated in line with expectations in March.
Bonds:
Eurozone government bond yields were marginally lower in opening trade.
"Overall, markets are not pricing in a full resolution, but rather a controlled easing of risk, leaving sentiment fragile and highly dependent on further geopolitical developments, inflation data, and central bank signals," Zaye Capital Markets said.
Treasury yields edged lower after the cease-fire in the Middle East was extended and after Federal Reserve Chair nominee Kevin Warsh pledged to keep Fed policy independent.
Gilt Yields Fall After U.S. Extends Cease-Fire, U.K. Inflation as Expected -- Market Talk
Yields on U.K. government bonds fell on improved market sentiment and after data showed U.K. inflation rose in March in line with expectations.
Commerzbank said it thought that the extension of the cease-fire in the Middle East was moderately bullish for bond markets , but noted that markets were growing increasingly numb to developments in Iran.
The German bank continues to see 10-year Bunds as a buying opportunity at yields above 3%.
Energy:
Oil prices slipped in early trade after the Iran cease-fire extension.
"Supply risks persist despite partial geopolitical relief," Zaye Capital Markets said.
Natural Gas
The cease-fire with Iran eased fears of near-term escalation, helping European natural-gas prices to fall . At the same time, Europe is benefiting from weaker demand, particularly from India and China.
"Traders have scaled back exposure to gas, with total open interest in Europe's benchmark dropping to its lowest point since September," ANZ said. "Higher prices and supply disruptions are triggering demand losses in many countries. The 30-day moving average for deliveries to the region is down around 15% compared to the same period last year."
Metals:
Gold futures rose more than 1% as oil prices fell.
"Trump's extension of the cease-fire reduces the immediate risk of military escalation--and with it the threat of a further inflationary oil price spike--while also weighing on the dollar. Until a clearer path toward a peace deal emerges, gold and silver are likely to remain in competition with the dollar for direction, leaving prices rangebound for now," Saxo Bank said.
EMEA HEADLINES
Danone Sales Grow as U.S. Momentum Returns
Danone reported like-for-like sales growth for the first quarter and said it is starting to regain momentum in the U.S.
The French food company, which makes Activia yogurt and Evian water, reported like-for-like sales growth of 2.7% for the quarter. Volume increased 1.5% year-on-year, while pricing was up 1.2%. A company-compiled poll of analyst estimates expected like-for-like sales growth of 2.6%.
T-Mobile and Germany's Deutsche Telekom Weigh Combination
T-Mobile US and its majority owner, Germany's Deutsche Telekom, are discussing combining to create a more streamlined telecom behemoth, according to people familiar with the matter.
Nordea Backs Guidance Despite Market Uncertainty
Nordea Bank backed its guidance as it noted that Nordic businesses remain confident despite uncertainty around global growth.
The Helsinki-based bank on Wednesday posted net profit attributable to shareholders of 1.1 billion euros ($1.29 billion) for the first quarter, down slightly from 1.21 billion euros a year earlier, as net interest income fell 3.8% to 1.76 billion euros.
Chip-Equipment Supplier ASM International Logs Higher Sales on Booming AI Demand
ASM International posted strong sales for the first quarter as chip makers continue to invest in tools to make increasingly sophisticated semiconductors in a bid to satisfy booming demand for artificial intelligence.
The Dutch group, which supplies wafer-processing equipment for the deposition of thin films, reported sales of 862.5 million euros, equivalent to $1.02 billion. These were up 16% on year at constant currencies and above analysts' forecasts of EUR834.6 million, according to Visible Alpha.
Deutsche Lufthansa to Cancel 20,000 Short-Haul Flights to Save Jet Fuel
Deutsche Lufthansa will cancel some European routes and 20,000 short-haul flights scheduled until October in a bid to save jet fuel, as airlines struggle with potential shortages and higher prices due to the war in Iran.
The German group said Tuesday that the flights canceled are operated by several of its airlines, mostly its regional carrier CityLine, and will equal a 1% reduction in its passenger capacity.
GLOBAL NEWS
Warsh Pledges Independence at Fed Hearing
President Trump's pick to lead the Federal Reserve, Kevin Warsh, told senators Tuesday that he would chart a sharp departure from the central bank's recent approach while promising to maintain institutional independence from a president who has repeatedly voiced his preference for looser monetary policy.
"The president never asked me to predetermine, commit, fix, decide on any interest rate decision in any of our discussions, nor would I ever agree to do so," Warsh said at his confirmation hearing on Capitol Hill.
Japan's Trade Outlook Clouded by Middle East Conflict
TOKYO-Japan's exports and imports continued to rise in March but the trade outlook for the months ahead remains clouded by war in the Middle East.
Exports climbed 11.7% on the year last month, extending the streak of gains to a seventh straight month, government data showed Wednesday. That beat both February's 4.0% rise and the 11% increase forecast in a poll of economists by data provider LSEG.
How Asia's Biggest Nations Are Riding Out the Energy Shock
When the war in Iran started nearly two months ago, countries in Asia-which receive more than 80% of the oil and liquefied natural gas delivered through the Strait of Hormuz-were among the most exposed to the energy shock.
But now, a combination of deep reserves, aggressive energy conservation efforts and savvy diplomatic efforts have allowed the deepest-pocketed of them to weather the blow-at least for now.
No Peace Plan, No Problem: Why the Wartime Market Keeps Rising
Days after the U.S. and Israel attack on Iran, Anthony Reid was at home in Dallas wondering whether a doomsday energy shock for the global economy was precisely the time to make a big bet.
Reid stared at his phone and considered plowing a chunk of his savings into shares of Robinhood. He had reasons to hold off. First of all, it would be a lot of money for a 30-year-old Amazon delivery driver new to investing. Second, a historic oil disruption from a war in Iran could turbocharge inflation and hammer stocks.
Canada Has No Appetite to Revise USMCA, Chief Negotiator Says
OTTAWA-Canada's chief U.S. trade negotiator said her mandate is to preserve the key elements of the existing North American trade treaty, with no intention to significantly revise or rewrite the pact's terms.
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