As of 12:00 Germany time (CEST, UTC+2)
TL;DR: Hot U.S. inflation and a fragile U.S.-Iran ceasefire kept the dollar and yields firm, while easing oil and renewed AI strength helped equities stabilize into Wednesday’s European session.
In Asian Equity Markets stocks recovered from an early selloff on Wednesday as renewed optimism around AI-linked growth outweighed concerns over hotter U.S. inflation and stalled U.S.-Iran diplomacy. MSCI’s broadest index of Asia-Pacific shares outside Japan rose around 0.3 percent after falling as much as 1 percent earlier in the session, while Japan’s Nikkei gained around 0.8 percent. South Korea’s KOSPI rebounded 2.6 percent to a record close after initially sliding on Samsung labour concerns, with investors refocusing on the region’s strong semiconductor and AI-export story.
In Currency Markets the U.S. dollar held near a one-week high as stronger-than-expected U.S. inflation reinforced expectations that the Federal Reserve will stay restrictive for longer. The dollar index traded around 98.5, while the euro slipped toward $1.171 and sterling eased to roughly $1.352. The yen weakened slightly to around 157.8 per dollar, keeping intervention risk in focus after a sudden move stronger on Tuesday sparked speculation of a Japanese rate check. China’s yuan traded near its strongest level since early 2023 ahead of President Trump’s visit to Beijing for talks with President Xi.
In US Equity Markets stocks finished mixed to lower on Tuesday after April inflation came in hotter than expected, pressuring rate-sensitive and high-multiple technology shares. The S&P 500 fell 0.16 percent to 7,400.96, while the Nasdaq Composite declined 0.71 percent to 26,088.20. The Dow Jones Industrial Average edged up 0.11 percent to 49,760.56. Semiconductor shares were among the main drags, with the Philadelphia Semiconductor Index falling around 3 percent after a powerful AI-led rally. The inflation print added pressure to equities by pushing investors to reassess the likelihood of further Fed tightening later this year.
In Commodities Markets oil eased after a three-day rally, although prices remained firmly above $100 per barrel as markets continued to price in supply risk from the Middle East conflict. Brent crude traded around $107.6 per barrel, while U.S. West Texas Intermediate hovered near $101.8. The fragile ceasefire between the U.S. and Iran remains central to the outlook, especially given the continued disruption around the Strait of Hormuz. Gold slipped modestly to around $4,708 per ounce as the firmer dollar and elevated Treasury yields offset ongoing geopolitical demand for safe havens.
In European Equity Markets stocks rebounded by late morning as slightly lower oil prices and solid corporate earnings helped offset the drag from Tuesday’s inflation-driven selloff. The pan-European STOXX 600 rose around 0.7 percent, while Germany’s DAX gained 0.9 percent and the UK’s FTSE 100 added 0.6 percent. Technology shares led the advance, with semiconductor names such as Infineon, STMicroelectronics and Aixtron moving sharply higher. Merck rallied after lifting its profit outlook, ABN Amro gained on stronger-than-expected earnings and Intertek surged after backing a takeover approach from EQT.
In Bond Markets U.S. Treasury yields edged lower from recent highs, but remained elevated after the hotter inflation report reinforced expectations for a tighter policy backdrop. The benchmark 10-year Treasury yield traded near 4.46 percent, while the two-year yield hovered around 3.98 percent. Markets have largely priced out expectations for Federal Reserve rate cuts this year, while the probability of a 25 bps rate hike in December has risen materially. The rates market remains caught between easing oil prices on one side and still-sticky inflation and geopolitical supply risks on the other.
