European stocks slip, dollar steady as investors assess Israel-Iran truce, eye US data

CNA

6 hours ago

TOKYO/GDANSK :European shares turned lower and crude oil held not far from multi-week lows on Wednesday, as investors assessed whether a ceasefire between Israel and Iran would hold even as immediate worries about an energy shock receded.
The dollar languished close to an almost four-year low versus the euro, with two-year U.S. Treasury yields holding at 1-1/2-month troughs as lower oil prices reduced the risk to bonds from an inflation spike.
At a NATO summit on Wednesday, U.S. President Donald Trump basked in the quick end to the war between Iran and Israel, saying he now expected a relationship with Tehran that would preclude rebuilding its nuclear programme despite uncertainty over how much damage was indeed inflicted by U.S. airstrikes.
With the shaky truce so far holding, investors turned their focus back to the U.S. economy and monetary policy, after a series of U.S. macroeconomic data overnight showed possibly weaker than expected growth in the world's largest oil consumer, bolstering expectations of Federal Reserve rate cuts this year.
Europe's Stoxx 600 index eased 0.3 per cent after opening a touch higher. S&P 500 futures were flat, while Nasdaq futures edged up 0.2 per cent.
"I think the Fed is back in focus today after Powell's testimony yesterday, but also because we had de-escalation in the Middle East," said Samy Chaar, chief economist at Lombard Odier. "Now the core focus is what happens to U.S. rates and what happens to U.S. macro."
Federal Reserve Chair Jerome Powell said on Tuesday that higher tariffs could begin raising inflation this summer, a period that will be key to the U.S. central bank considering possible rate cuts.
Markets continue to price in a roughly 19 per cent chance that the Fed will cut rates by a quarter point in July, according to the CME FedWatch tool.
Meanwhile, brent crude rose 0.8 per cent to $67.65 per barrel, paring gains from earlier in the day but still bouncing from a plunge of as much as $14.58 over the previous two sessions. U.S. West Texas Intermediate crude was up by as much to trade at $64.87 per barrel.
Prices had rallied to five-month highs after the U.S. bombed Iran's nuclear facilities over the weekend.
"While concerns regarding Middle Eastern supply have diminished for now, they have not entirely disappeared, and there remains a stronger demand for immediate supply," analysts at ING wrote in a note to clients.
Regardless, the yield on two-year U.S. Treasury was at its lowest since May 8 at 3.7868 per cent on reduced risks from a hike in inflation, while Asian shares closed the session higher.
Japan's Nikkei rose 0.4 per cent to its highest closing level in more than four months on Wednesday.
Hong Kong's Hang Seng climbed 1.3 per cent and mainland Chinese blue chips gained 1.44 per cent, closing at their highest level since March 20.
An MSCI index of global stocks held steady after pushing to a record high overnight.
The euro slipped 0.1 per cent to $1.1599, still close to the overnight high of $1.1641, a level not seen since October 2021, while the U.S. dollar index, which measures the currency against six major counterparts, was edging higher at 98.113.
Investors were awaiting U.S. government data on domestic crude and fuel stockpiles due on Wednesday.
The focus was also on the Commerce Department's final take on first-quarter GDP due on Thursday, as well as Friday's Personal Consumption Expenditures report that will help determine the economic effects of President Donald Trump's tariffs that have unnerved global markets this year.