European Stocks Poised for Cautious Open

Stocks in Europe edged higher on Tuesday, with both the STOXX 50 and STOXX 600 gaining 0.3%, extending the record highs reached in the previous session. Investors continued to assess the preliminary agreement between the US and Iran aimed at ending the conflict and reopening the Strait of Hormuz. Meanwhile, the Bank of Japan raised borrowing costs as widely expected. Market attention is also turning to this week's policy decisions from the Fed and the BoE while other central banks in Europe including Switzerland, Norway and Sweden will also decide on monetary policy. Industrials and financials were among the top performers. Siemens (0.9%), Schneider Electric (1.9%), Airbus (1.1%), Rolls Royce (1.7%), Safran (1.7%), BBVA (1.2%), Intesa Sanpaolo (1.4%) were booking strong gains. UniCredit was also up more than 3% after Germany rejected its offer to buy Commerzbank. In contrast, Novartis (-0.5%), LVMH (-0.3%), L'Oreal (-0.3%), Novo Nordisk (-0.6%), TotalEnergies (-0.5%) were in the red.

European equity markets were set to open flat to slightly lower on Tuesday as investors awaited greater clarity on the US-Iran peace agreement and a series of major central bank decisions this week. The interim accord is expected to be signed in Switzerland on Friday, with President Donald Trump indicating that the free flow of oil from the Persian Gulf would resume once the deal takes effect. Meanwhile, several European central banks, including those in the UK, Switzerland, Norway, Sweden, and Russia, are scheduled to announce monetary policy decisions. On the data front, investors will also monitor the ZEW Economic Sentiment Index for Germany and the Eurozone due later today. In premarket trading, Euro Stoxx 50 and Stoxx 600 futures were little changed to slightly lower.

European stocks rose to record highs on Monday after the US and Iran agreed to a deal that suspends their war. The Euro STOXX 50 added 0.8% to a peak of 6,236 and the STOXX Europe 600 gained 0.3% to 635. The deal is set to be signed on Friday and reportedly restores the flow of energy exports through the Strait of Hormuz, lowering oil prices and sovereign yields throughout Europe's largest economies. Money markets have scaled back expectations for rate hikes, now pricing in just one increase each from the ECB and the BoE by year-end. The developments lifted banks amid the improved outlook of credit activity, with Santander, Deutsche Bank, and BBVA adding between 4.56% and 3%. Industrials were also supported on improved demand and lower power costs, with Safran jumping 3.5% and Siemens adding 2.2%.