A look at the day ahead in European and global markets

By Kevin Buckland

Escalating hostilities in the Middle East gripped the attention of traders and investors in Asia on Wednesday, as worries lingered over the possibility of a wider war.

Crude oil continued its march higher, gold hovered close to its all-time high, and bonds were bought, along with the safe-haven dollar.

However, some markets were willing to look past the risks, particularly in Hong Kong, where the benchmark Hang Seng stock index surged more than 4% as the market’s sugar rush from China’s stimulus announcements showed little sign of fading. The euphoria might have gained even more momentum if mainland Chinese markets hadn’t shut for the Golden Week holiday.

The risk-sensitive Australian and New Zealand dollars rebounded, reflecting both countries’ close links to China, a top trading partner.

European stock futures currently point to a higher open.

Iran has stated that its attack is over, barring further provocation, following a salvo of some 180 ballistic missiles. However, Israel – fully backed by the United States – vowed a response.

There’s little to distract from Middle East developments during Europe’s day, with a dearth of macroeconomic data or scheduled corporate announcements.

The course of British ties with the European Union could be steered by UK Premier Keir Starmer’s discussions on trade and security with European Commission President Ursula von der Leyen in Brussels. Both sides have been discussing a “reset.”

A host of ECB speakers are scheduled for Wednesday, including Vice President Luis de Guindos and Chief Economist Philip Lane. A quarter-point rate cut this month appears almost assured, following mild inflation readings and hints from ECB President Christine Lagarde.

The focus may shift to the Federal Reserve, especially with monthly payroll figures due this Friday, which could determine whether U.S. policymakers opt for a 25 or 50-basis-point rate reduction next month. Additionally, hints will come from the private-sector ADP employment report later today.

The U.S. day has many events that could keep markets occupied if the Middle East situation stabilizes.

A quick end to the massive dock worker strike disrupting half of the country’s shipments seems unlikely, with no active negotiations overnight. The strike affecting various goods may cost approximately $5 billion per day.

Key developments that could influence markets on Wednesday:

• Eurozone unemployment rate (Aug)
• ECB speakers including de Guindos, Lane
• European Commission President von der Leyen talks with UK PM Starmer
• U.S. ADP employment (Sep)

(By Kevin Buckland; Editing by Edmund Klamann)