European Stocks Edge Down to Kick Off Q3

European stocks opened Q3 on a weaker footing, with both the STOXX 50 and the STOXX 600 slipping 0.3% as investors paused after strong gains during the previous three-month period. Traders continued to assess the AI-driven rally while digesting signs of a stalemate in US-Iran talks after Iran said it would not meet with US officials. Investors were also focused on the ECB Forum, where policymakers from major central banks, including the Fed and the ECB, are scheduled to speak later in the day. The tech sector was broadly unchanged, with ASML Holding down 0.4%, Infineon Technologies hovering around the flatline, and STMicroelectronics edging up 0.1%. Among other major stocks, LVMH (-0.8%), Siemens (-1.1%), Hermes (-0.5%), and Santander (-1.4%) traded lower. Schneider Electric dropped 2.5% after announcing an agreement to acquire Cognite Holding. On the upside, Rheinmetall gained 2.9%, and Airbus was up 1.6%, some of the session's top performers.

European equity markets were set to open slightly lower on Wednesday as the recent rally in global stocks lost momentum, while investors cautiously awaited a key US jobs report and Federal Reserve Chair Kevin Warsh’s remarks at the ECB Forum in Sintra, Portugal. European shares ended at record highs on Tuesday, supported by softer inflation data and growing expectations that the European Central Bank will keep interest rates unchanged in the near term. Investors now turn their focus to UK house price data, flash Eurozone inflation estimates and final PMI readings from across the region. Meanwhile, no major corporate earnings releases are scheduled in Europe. In premarket trading, Euro Stoxx 50 and Stoxx 600 futures were both down about 0.1%.

European stock indices closed at record highs on Tuesday after evidence of softer inflation supported an outlook of lower interest rates for the corporate sector. The Euro STOXX 50 gained 1.5% to 6,326 and the STOXX 50 added 0.9% to 642, both at record-high closes. Preliminary inflation prints were lower than expected in Germany, France, and Italy in June to build expectations that the inflationary surge from the war in the Middle East has topped. Rate traders piled on positions that reflected no more rate hikes by the ECB this year, lowering sovereign yields and supporting the outlook for credit activity. UniCredit, BNP Paribas, and ING jumped close to 2%. Meanwhile, Siemens and Siemens Energy surged 4.4% and 5.4%, respectively, on improved data center outlooks submitted by brokers. On top of that, the rally for global chip producers was extended, lifting ASML by 7%. Outside the STOXX 50, Abivax surged 40% on optimistic signs in its obefazimod drug study.