European Stocks Set for Muted Open

European stocks edged cautiously higher on Wednesday, with the STOXX 50 rising 0.5% and the STOXX 600 gaining 0.3%. Sentiment was supported after President Trump said he would extend the ceasefire with Iran indefinitely, just before its expiration, to allow time for peace talks. He also indicated that no new attacks were planned, although the blockade of the Strait of Hormuz would remain in place. Separately, reports suggested that Iran had received “some indication” that the US may be willing to ease the blockade. However, uncertainty persists over the timing of any formal negotiations. Meanwhile, the earnings season continues, with shares of ABB jumping more than 5% after the company beat expectations and raised its guidance. On the other hand, Moncler decreased 1.5% as its results failed to impress investors. Deutsche Telekom fell 1.6%, with Bloomberg reporting the company was considering a full combination with T-Mobile US that could result in the largest M&A deal on record.

European equity markets were poised for a subdued open on Wednesday as caution lingered after US-Iran peace talks broke down, even as President Donald Trump extended the current ceasefire. Reports indicated Vice President JD Vance canceled a planned trip to Islamabad for negotiations after Tehran informed the US via Pakistan that it would not participate in the meeting. Meanwhile, Trump said he would hold off on further strikes until Iran submits a new proposal and talks are finalized. In Europe, investors will look to UK inflation data for insight into the impact of higher energy costs on domestic prices. On the corporate front, earnings are due from L’Oréal, ABB, Essilor, TE Connectivity, and Danone, among others. In premarket trading, Euro Stoxx 50 and Stoxx 600 futures were broadly flat to slightly higher.

European stocks closed sharply lower on Tuesday, erasing early gains amid increasing doubts that the US and Iran may be able to strike an agreement that would restore energy exports from the Persian Gulf. The Eurozone's STOXX 50 fell by 0.7% to 5,939 and the pan-European STOXX 600 lost 0.8% to 616. US President Trump signaled optimism that talks with Iran would happen shortly after stating the ceasefire that ends tomorrow will not be extended, but hawkish remarks from both sides dimmed hopes of further de-escalation. Oil and natural gas prices in Europe rose further, hitting the outlook for margins in industrial giants with Safran, Rheinmetall, and Airbus sinking between 7% and 3%. In the meantime, yields rebounded and pressured banks, with UniCredit, Santander, and BBVA losing close to 2% each. L'Oreal fell 1.5% ahead of its earnings tomorrow.