European Stocks Set for a Softer Open

European stocks fell on Tuesday, with both the STOXX 50 and STOXX 600 down 0.3% following a subdued session the previous day. Oil prices extended their gains as tensions in the Middle East remained elevated. Meanwhile, natural gas prices hovered near their highest levels in more than three years, adding to inflationary pressures and strengthening expectations that further monetary-policy tightening may be needed. The ECB is expected to raise borrowing costs by another 25 basis points this week. Shares of Novartis tumbled almost 9%, making it the worst performer on the STOXX 600, after its pelacarsen drug failed to reduce cardiovascular events despite lowering harmful cholesterol. The results raise questions about one of the pharmaceutical industry’s most closely watched drug races. Infineon also fell 2.6%, while ASML slipped 0.7% despite securing commitments from top chipmakers, including Samsung and TSMC, to use its latest semiconductor production equipment.

European equity markets were poised to open slightly lower on Tuesday as investors continued to grapple with rising oil prices, keeping inflation risks and interest rate concerns in focus. Traders were also preparing for the European Central Bank’s meeting this week, where policymakers are expected to deliver a 25-basis-point rate hike. Meanwhile, markets remained attentive to political tensions in Germany after the far-right AfD party won in Saxony-Anhalt. Investors will also examine German and French trade data for fresh clues about the region’s economic health. In corporate developments, Renault is preparing to launch sales of its revamped electric Dacia Spring, while Jaguar Land Rover plans to cut around 4,000 jobs amid US tariff pressures, a recent cyberattack and fierce competition. In premarket trading, Euro Stoxx 50 and Stoxx 600 futures were both down approximately 0.2%.

European stock indices closed with small movements on Monday as markets continued to assess how the corporate sector will fare against higher interest rates, with the threat of higher budget deficits and political uncertainty lifting sovereign yields. The Euro STOXX 50 inched up by 0.1% to 6,399 and the STOXX Europe 600 was unchanged at 649.8. The German far-right AfD party won state elections in Saxony-Anhalt over the weekend, the party's first major victory, to extend the momentum of political fragmentation in Europe. Bund yields surged with the outlook of wider deficits combined with inflationary risks from soaring natural gas prices, as the European Central Bank is due to deliver its second rate hike of the year this week. Insurance stocks tumbled, with Munich Re down 3% while Allianz fell nearly 1%. Meanwhile, ASML gained 2.3% and Infineon soared 6.4% as strong signals by Korean chipmakers supported the sector.