European Stocks Set for Lower Open

European equity markets were on track for a weaker open on Thursday as investors remained cautious ahead of the European Central Bank’s policy decision. The ECB is widely expected to raise its benchmark interest rate by 25 basis points to 2.25% as policymakers seek to contain inflationary pressures fueled by soaring energy costs linked to the Middle East conflict. If delivered, it would mark the central bank’s first rate increase since September 2023. Meanwhile, the US and Iran exchanged attacks this week in a major breach of their ceasefire, although the US military said it has completed its latest strikes on Iran, raising hopes that peace negotiations could resume. In premarket trading, both Euro Stoxx 50 and Stoxx 600 futures were down about 0.5%.

European stocks ended lower on Wednesday, with the STOXX 50 declining 0.4% and the STOXX 600 remaining flat, as investors adopted a cautious stance amid renewed Middle East tensions following US-Iran strikes and ahead of the ECB’s monetary policy decision on Thursday. The ECB is widely expected to raise interest rates by 25 basis points, with investors closely monitoring policymakers’ signals on the future path of monetary policy. In the US, the May CPI report confirmed inflation reached a three-year high of 4.2%, matching expectations and reinforcing bets on a Federal Reserve rate hike in December. Meanwhile, UK lenders extended losses from the previous session after a JP Morgan note warned of a potentially greater impact from new Chinese regulations. STMicroelectronics also closed slightly lower, despite an upgrade to "buy" from "neutral" by BofA Global Research.

European stocks turned lower after a positive start on Wednesday, with the STOXX 50 falling 0.3% and the STOXX 600 slipping 0.2%, as investors avoided taking large positions while assessing renewed tensions in the Middle East after the US and Iran exchanged strikes and awaiting the ECB's monetary policy decision on Thursday. Meanwhile, the ECB is widely expected to raise interest rates by 25bps this month, with investors closely watching policymakers' guidance on the future path of monetary policy. In the US, attention is also focused on the CPI report due later in the day. HSBC Holdings dropped 2.2% as UK lenders extended losses from the previous session after a JP Morgan note highlighted a potentially greater impact from new Chinese regulations. SAP and Siemens Energy both fell 1.7%, while Thyssenkrupp lost 3.5%. On the upside, STMicroelectronics gained 1.2% after BofA Global Research upgraded the chipmaker to "buy" from "neutral", while Infineon advanced 0.6%.