European Stocks Tread Water

European stocks traded cautiously on Wednesday, with both the STOXX 50 and STOXX 600 fluctuating around the flatline after posting modest gains in the previous session. Investors kept their attention on the corporate earnings season, although lingering uncertainty in the Middle East continued to drive oil prices higher, weighing on market sentiment. ASML surged more than 6% after raising its 2026 financial guidance and announcing plans to expand production capacity, following better-than-expected second-quarter results driven by strong demand for AI-related technologies. Richemont also gained more than 5% after reporting stronger-than-expected second-quarter sales. Other notable gainers included LVMH (+2.1%) and Hermes (+2.5%). In contrast, Nestle (-1.3%), Siemens (-0.6%), and SAP (-1.1%) traded lower.

European equity markets were set to open lower on Wednesday, giving back some of the previous session’s gains as investors continued to assess escalating tensions in the Middle East that drove oil prices higher. The US launched another round of strikes against Iran while reinstating its naval blockade of Iranian ports near the Strait of Hormuz, raising fresh concerns over regional stability and energy supplies. Meanwhile, softer-than-expected US inflation data reduced expectations of an imminent Federal Reserve interest rate hike, lending some support to broader equity markets. In Europe, investors will focus on Eurozone industrial production and final Spanish inflation figures, while the corporate earnings calendar remains light. In premarket trading, Euro Stoxx 50 futures slipped 0.1%, while Stoxx 600 futures declined 0.2%.

European stocks rebounded to close slightly higher on Tuesday after soft inflation data in the US reduced sovereign yields in major economies. The Euro STOXX 50 inched higher by 0.2% to 6,283 and the STOXX Europe 600 rose 0.1% to 642. Both headline and core inflation rates in the US declined more than expected in June, shutting the door on a Fed hike this month and adding some respite for bonds across major economies, improving credit conditions for European corporate giants. Banks benefited from the data, with BNP Paribas, ING, and Deutsche Bank adding more than 1%. Power operators also rose sharply amid the rebound in AI stocks, tracking companies with exposure to AI infrastructure. Schneider added 1.7% and Siemens Energy advanced 3%. Meanwhile, ASML rose by 0.7% ahead of its earnings tomorrow.