European shares rose on Wednesday, amid a slight pullback in oil prices and bond yields.
Sentiment improved to a certain extent amid hopes of a diplomatic resolution to the geopolitical tensions in the Middle East. However, caution could remain amid shifting rhetoric and risks of re-escalation in the region.
Elevated oil prices could continue to fuel inflation concerns and expectations of a more hawkish monetary policy tilt, which could put a lid on equities.
While euro area CPI figures came in as expected, Germany’s producer prices rose more than anticipated to reach 1.7% year-on-year, driven by higher intermediate goods and energy prices amid Middle East disruptions. Persistent upstream price pressures could further weigh on stock markets.
Meanwhile, the EU’s provisional agreement to remove tariffs on US goods helped improve sentiment and reduce near-term trade uncertainty, which could support the outlook for export-oriented sectors.
Looking ahead, investor could shift their focus to Nvidia’s earnings after the US market closes today for hints on AI demand. Strong guidance could reinforce risk appetite, while any signs of slowing demand may pressure broader equity sentiment.
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