Key facts
- European stocks rose 0.1% on Wednesday, shrugging off renewed Iran-US hostilities.
- Asia-Pacific shares outside Japan fell 2.3%, with the tech-heavy South Korean KOSPI down 4.5%.
- Oil prices edged up, with Brent futures at $91.66 and WTI crude at $88.46.
- Investors await U.S. inflation data, expected to show a 4.2% annual rise in May.
- Traders have fully priced in a 25 basis point Federal Reserve rate hike in December.
- The European Central Bank is widely expected to raise interest rates by 25 basis points.
European stocks showed resilience on Wednesday, largely shrugging off renewed hostilities between Iran and the United States, while oil prices saw a slight increase. The pan-European STOXX 600 index rose 0.1%, with most sectors contributing to the gains.
This contrasted with a significant sell-off in Asian markets, where the MSCI's broadest index of Asia-Pacific shares outside Japan fell 2.3%. The tech-heavy South Korean KOSPI was particularly hard-hit, losing 4.5% as artificial intelligence stocks faced pressure. Iran's Revolutionary Guards stated they conducted missile and drone attacks on U.S. military bases in Jordan, Kuwait, and Bahrain in retaliation for earlier U.S. strikes.
Investors are also focused on upcoming U.S. inflation data, with economists predicting a 4.2% annual increase in the 12 months through May. This data, alongside a recent strong jobs report, has increased bets that the Federal Reserve will hike interest rates this year, with traders now fully pricing in a 25 basis point hike in December. The dollar index edged lower, while the euro and sterling remained steady against the dollar.
The European Central Bank's monetary policy meeting was also set to begin, with a 25 basis point rate hike widely anticipated. In Japan, wholesale inflation accelerated in May, adding to the case for further interest rate hikes by the Bank of Japan.