European Stocks Head for Lower Open

Stocks in Europe were lower on Wednesday, with the STOXX 50 falling 0.7% and the STOXX 600 declining 0.5%, as higher oil prices continued to weigh on market sentiment. Brent crude hit $100 a barrel as tensions between the US and Iran escalated. The rise in energy prices could put further pressure on inflation and reinforce the case for additional monetary policy tightening. The ECB is widely expected to deliver a 25bps rate hike tomorrow, with traders set to assess any further guidance on the policy outlook. Inditex tumbled more than 3% despite reporting a better-than-expected start to its autumn trading season, with currency-adjusted sales rising 9% in August. Rheinmetall was also among the worst performers, falling 2.5% and nearly reversing its 3% gain in the previous session. Energy stocks, meanwhile, moved higher, with TotalEnergies gaining 1%, Shell rising 1%, BP adding 1.7%, Galp advancing 1.6%, and Repsol climbing 2.1%.

European equity markets were set for a weaker open on Wednesday as oil prices extended their gains amid escalating Middle East tensions, raising inflation concerns and strengthening expectations for interest rate hikes. In the latest developments, Iran said it had struck two American vessels and eight oil tankers in the Gulf in retaliation for US attacks on five Iranian tankers near Kharg Island. Investors were also preparing for the European Central Bank’s policy decision on Thursday, with the central bank widely expected to deliver a 25-basis-point rate hike. In corporate news, Dutch semiconductor equipment maker ASML secured commitments from major chipmakers to adopt its latest production technology as demand for more advanced AI hardware continues to surge. In premarket trading, Euro Stoxx 50 and Stoxx 600 futures were both down around 0.4%.

European stocks closed with small movements for a fourth session as the outlook of higher interest rates by the European Central Bank dented the market's demand for more risk. The Euro STOXX 50 inched higher by 0.1% to 6,413 and the STOXX 600 closed flat at 649.6. Traders added positions that correspond to multiple rate hikes by the ECB this year as natural gas prices benchmark rose to their highest since the Russian invasion of Ukraine, lifting inflation risks and sovereign yields. The central bank is largely expected to deliver a rate hike this week. Industrial stocks closed higher after underperforming in recent sessions, with Rheinmetall, Airbus, and Schneider adding over 2%. On the other hand, insurers remained under pressure with Munich Re and AXA down 2% and 1%, respectively. Luxury brands also dropped after Chinese trade data, with Ferrari and Hermes slipping 2%.