European Stocks Set for Subdued Open

European stocks moved lower on Tuesday, extending losses from the previous session. The STOXX 50 fell 0.8% to low levels not seen in nearly two months, while the STOXX 600 declined 0.6% to three-month lows. Oil prices continued to climb, with Brent crude trading above $107 a barrel, adding to concerns over an already challenging inflation outlook. Bond yields also continued to rise, reaching multi-year highs and further weighing on equity valuations and investor sentiment. Banks were among the biggest laggards, with UBS down 3.6%, Deutsche Bank 3.5%, UniCredit 2.4% and HSBC 1.6%. Other major stocks also traded lower, with LVMH falling 1.8%, L’Oreal declining 1.1% and Siemens down 0.8%. On the other hand, ASML Holding rose 0.9%, recovering modestly after a sharp decline in the previous session. Thales (+1.5%) and Rheinmetall (+0.8%) also traded higher.

European equity markets were set to open little changed on Tuesday as cautious sentiment prevailed ahead of key central bank policy decisions this week. The US Federal Reserve and the Bank of Japan are widely expected to raise interest rates on Wednesday and Friday, respectively, while the Bank of England is expected to leave policy unchanged on Thursday. Traders also remained focused on rising oil prices, which added to inflationary pressures, while higher global bond yields further weighed on equity markets. In Europe, investors will monitor UK unemployment and German economic sentiment data, with no major earnings reports scheduled. In premarket trading, Euro Stoxx 50 and Stoxx 600 futures were hovering around the flatline.

European stocks closed sharply lower on Monday amid another jump in sovereign yields and fresh concerns that risks to AI safety could hamper investment in hardware. The Euro STOXX 50 fell 1.1% to 6,257 and the STOXX Europe 600 dropped 0.5% to 636. Anthropic CEO Dario Amodei called for a slowdown on the development of frontier AI models to prevent a scenario where the loss of control in agents could have adverse effects on society, prompting endorsements from rivals OpenAI and xAI. The possibility of added guardrails on AI development pressured stocks for chip manufacturers and other companies in the AI infrastructure sector. ASML and Infineon sank 6.3% and 7.5%, respectively, while Schneider Electric lost 6.8% and Siemens Energy plummeted 8.5%. Meanwhile, banks also closed sharply lower as more escalation in the Middle East lifted oil and gas prices and worsened the inflation outlook in the Eurozone. Santander, BBVA, Intesa Sanpaolo, and Deutsche Bank dropped between 2% and 1.3%.