Gold prices fall as geopolitical tensions ease; U.S. CPI looms
Investing.com - European stocks steadied Wednesday, as investors warily assessed the ongoing conflict between Israel and Iran, ahead of the conclusion of the latest Federal Reserve policy meeting.
At 03:05 ET (07:05 GMT), the DAX index in Germany dropped 0.1%, while the CAC 40 in France gained 0.2% and the FTSE 100 in the U.K. rose 0.1%.
Concerns over Israel-Iran conflict escalation
The Israel-Iran war has entered a sixth day, and sentiment remains fragile, especially following a Wall Street Journal report which stated that U.S. President Donald Trump convened senior advisers to review options, including strikes on Iran.
Trump also demanded "unconditional surrender" from Tehran, warning that U.S. patience was “wearing thin” while claiming that America held “complete and total control over Iranian skies.”
This has increased market unease that the conflict may escalate, dragging other countries in the region into the war.
Fed concludes policy meeting
Investors are also cautious ahead of the conclusion of the latest Federal Reserve two-day policy meeting.
The U.S. central bank is widely expected to keep interest rates unchanged, but investors will scrutinize comments from Fed Chair Jerome Powell and his colleagues given the challenging global backdrop, as well as the Fed’s updated forecasts amid signs of cooling U.S. retail sales and mounting recession risks.
For now, markets are still pricing in two Fed cuts by December, but that could very well change after Powell speaks.
U.K. inflation cooled in May
Back in Europe, British inflation slowed as expected in May, as consumer prices rose in annual terms by 3.4% in May, a drop from 3.5% seen in April.
Services price inflation - a crucial metric for the Bank of England - cooled to 4.7% from 5.4% in April, matching the BoE’s forecast for May.
The BoE is expected to keep rates on hold on Thursday having lowered rates by a quarter point to 4.25% in early May 8, but a further two 0.25 percentage-point cuts are priced in by the year’s end.
Sweden’s Riksbank publishes its latest interest rate decision later in the session.
UBS suffers downgrade
In the corporate sector, there are no major quarterly earnings scheduled for release, but UBS (SIX:UBSG) will be in the spotlight after Morgan Stanley (NYSE:MS) downgraded its stance on the Swiss banking giant to “underweight” from “equal-weight,” citing ongoing capital uncertainty and weaker earnings relative to peers.
Crude prices slip
Oil prices slipped slightly lower Wednesday, handing back some of the prior session’s strong gains as the conflict between Israel and Iran continued.
At 03:05 ET, Brent futures dropped 0.1% to $76.38 a barrel and U.S. West Texas Intermediate crude futures fell 0.1% to $73.21 a barrel.
The benchmark contracts posted gains of over 4% Tuesday, as markets fretted about potential supply disruptions in the Strait of Hormuz, a conduit for a fifth of the world’s seaborne oil.