There is still hope for a ceasefire in the Middle East, yet markets remain unconvinced
A combination of rising energy prices and strong US labour market data is driving interest rates higher
Equities are under pressure , weighed down by higher interest rates, geopolitical tensions and weaker outlooks
There remains hope for an end to the conflict in the Middle East. This morning, reports from the United States suggested that Israel and Lebanon have reached an agreement to respect a ceasefire. This is a key condition for Iran to resume negotiations with the US. At the same time, the fact that this news originates from the US raises doubts as to whether Israel will actually halt its attacks on Hezbollah. After all, Israel’s strategic interests differ markedly from those of the US.
The reaction in the oil market reflects this scepticism. Oil prices edged down by 0.75% this morning to $97 per barrel. Following a rise of nearly 2% yesterday, this represents only a modest move, indicating that markets have limited confidence in a lasting ceasefire.
"}},{"componentType":"sectionTitle","title":"Oil prices and strong labour market push yields higher"},{"componentType":"paragraph","richBody":{"value":"The rise in oil prices, fuelled in part by Iranian attacks in the region and subsequent US retaliatory actions, was a key driver of higher yields on European government bonds yesterday. Germany’s 10-year yield rose by 6 basis points to 3.04%. Upward pressure on yields was further reinforced by strong US labour market data. Payroll processor ADP reported that 122,000 jobs were added last month, exceeding expectations of 120,000 and marking the highest monthly increase since January 2025. This underscores the strength of the labour market and gives the US central bank (the Fed) scope to raise policy rates further in its efforts to combat elevated inflation. The US two-year yield rose by 4 basis points to 4.08%, while the 10-year yield increased by 5 basis points to 4.49%. This upward move also spilled over into European markets.
In addition, final eurozone purchasing managers’ indices came in slightly higher than initially estimated, increasing the likelihood that the European Central Bank (ECB) will raise interest rates next week. The composite index stood at 48.5, compared with an earlier estimate of 47.5.
"}},{"componentType":"sectionTitle","title":"Geopolitical uncertainty weighs on European equities"},{"componentType":"paragraph","richBody":{"value":"The combination of higher interest rates, ongoing uncertainty in the Middle East and newly announced import tariffs by President Trump put European equity markets under pressure. The Stoxx Europe 600 index declined by 0.66%. A notable laggard was Akzo Nobel, which fell more than 17% after potential bidders Nippon Paint and Sherwin-Williams withdrew their takeover interest. In Switzerland, Partners Group experienced an exceptionally weak session, with its share price dropping 16%—the largest decline on record—after the firm announced restrictions on withdrawals from one of its evergreen funds.
"}},{"componentType":"sectionTitle","title":"Wall Street pauses after record levels"},{"componentType":"paragraph","richBody":{"value":"On Wall Street, the recent run of record highs came to a temporary halt. Investors were more concerned about rising energy prices resulting from the ongoing conflict in the Middle East than encouraged by optimism surrounding artificial intelligence. As long as oil and gas flows through the Strait of Hormuz are not fully restored, pressure on the global economy is likely to persist. Higher inflation and rising interest rates will ultimately weigh on economic growth, although this impact is likely to become more visible only in the coming months.
The S&P 500-index closed 0.7% lower, the Nasdaq fell by 0.9% and the Dow Jones Industrial Average ended the session down 1.2%. Within the market, alternative asset managers were under pressure. KKR and Blackstone declined by 4.2% and 4% respectively, amid concerns about increasing fund outflows. Palo Alto Networks dropped nearly 6% following disappointing quarterly results and dragged peers such as CrowdStrike and Zscaler lower. After the close, Broadcom issued weaker guidance, resulting in a share price decline of nearly 14%.
"}},{"componentType":"sectionTitle","title":"Weak sentiment in Asia following disappointing tech outlook"},{"componentType":"paragraph","richBody":{"value":"Negative signals from the technology sector carried over into Asian markets. In particular, Broadcom’s weaker outlook and CrowdStrike’s post-market decline in the US weighed on semiconductor and technology stocks. Most Asian markets saw profit-taking after the strong rally of the past two months, which can be seen as a healthy correction. At the time of writing, the Nikkei index is down 1.4%, the Hang Seng index has fallen 1.6% and the CSI 300 index is 0.8% lower. Elsewhere in the region, sentiment is similarly weak: Taiwan’s market closed 1.7% lower and the Kospi index is also down 1.7%.
"}},{"componentType":"sectionTitle","title":"Lower openings expected"},{"componentType":"paragraph","richBody":{"value":"Futures on US equity indices are trading between flat and 0.5% lower at the time of writing, pointing to a weaker opening for Wall Street later today. European equity markets are also expected to open around 0.5% lower. Semiconductor stocks in particular are likely to come under pressure following Broadcom’s disappointing outlook. For investors, this provides a logical opportunity to take profits after the recent rally.
"}},{"componentType":"sectionTitle","title":"Today’s agenda"},{"componentType":"paragraph","richBody":{"value":"On the macroeconomic agenda today are eurozone retail sales figures and the weekly initial jobless claims in the US, which are expected to come in at 215,000.
"}},{"componentType":"sectionTitle"},{"componentType":"paragraph","richBody":{"value":""}},{"componentType":"sectionTitle"},{"componentType":"paragraph","richBody":{"value":""}},{"componentType":"sectionTitle"},{"componentType":"paragraph","richBody":{"value":"
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