European stocks were mostly lower on Wednesday, although they looked to benefit from easing tariff tensions and receding recession risks given their sensitivity to global trade and economic growth.
The risk of a wave of cheap Chinese goods entering Europe and dragging inflation lower has also eased.
Goldman Sachs raised their growth forecasts for the U.S., Europe and China, and reduced their U.S. recession probability to 35% from 45%.
However, it is too soon to declare the global trade war over and trade talks continue, Rothschild Asset Management said, adding the final outcome is likely to be an average 15% tariff on imports.
"This was seen as a worst-case scenario during the election campaign, but now appears to be a lesser evil than the even more unfavourable scenarios feared by investors just a few days ago," it said.
Economic Insight
The Bank of England looked likely to cut interest rates twice more this year as the jobs market gradually weakened, Pantheon Macroeconomic said.
Still, there remained signs of underlying factors keeping pay growth rapid and stopping inflation from reaching the central bank's 2% target.
That means the BOE is unlikely to cut rates at successive meetings, Pantheon said.
A day earlier, signs of cooling inflation and a tech-stock rally had helped push the S&P 500 back into the black for 2025.
Investors will be watching for comments from two Federal Reserve officials and Cisco is due to report earnings after the closing bell.
Forex:
The dollar stayed under pressure after Trump repeated his calls for interest-rate cuts following Tuesday's lower-than-expected U.S. inflation data.
At first glance, the dollar's fall after the data seemed logical given the prospect of faster rate cuts, Commerzbank said.
However, it could also reflect the fact that Trump will feel vindicated given the lack of tariff effect in the data, it said.
The euro rose against the dollar but further gains could be limited, ING said.
Markets are likely to retain interest on short-seller bets against the dollar ahead of expected weaker U.S. data.
However, the euro isn't particularly well positioned to benefit from that as the ECB continues to cut interest rates and markets might look for more interest in higher risk currencies on the back of improved risk sentiment, it said.
Bonds:
Treasury yields edged slightly lower as investors didn't lose sight of volatility risks despite a better risk sentiment.
"A combination of progress in China-U.S. trade along with slowing inflation that gives the Federal Reserve some latitude are likely to support a risk on environment."
"We think equities could move higher on this news, but also feel as though investors should continue to be weary of further volatility spikes," it said.
Bunds could find firmer footing in the absence of major data while the focus remains on supply, Commerzbank said.
"Bunds should continue to stabilize, with [two-year] Schatz trading in a tight range and 10-year Bunds finding support at 2.68% yields lately."
Gilts on U.K. short-dated government bonds fell, tracking their U.S. counterparts after soft U.K. labor market data and U.S. inflation data eased market concerns about rising inflation.
"The initial U.S. inflation reading is probably reassuring for markets, increasing the likelihood the U.S. Federal Reserve moves to drop rates," Global X said.
Energy:
Oil prices retreated but remained near their highest levels since late April.
Prices were boosted by a weaker dollar after cooler-than-expected U.S. consumer price data and U.S. sanctions on more than 20 companies alleged to be shipping Iranian oil to China.
Meanwhile, reports citing figures from the American Petroleum Institute ahead of official EIA figures said U.S. crude stockpiles rose by 4.3 million barrels last week, above market expectations.
Metals:
Gold futures traded steady after a sharp selloff on Monday's session and weaker-than-expected U.S Consumer Price Index data on Tuesday.
The precious metal sold off sharply at the beginning of the week as the U.S.-China trade agreement spurred risk-on sentiment, then broadly stabilized on Tuesday as the latest U.S. inflation data increased optimism for interest-rate cuts later this year, ANZ said.
EMEA HEADLINES
Shell Faces Fresh Legal Challenge Over Development of New Oil and Gas Fields
Dutch energy giant Shell is facing a fresh legal challenge over its role in contributing to climate change, from activists seeking to halt new developments of oil and gas projects by the company.
In a statement of its intent to start legal proceedings, the Dutch arm of environmental group Friends of the Earth, Milieudefensie, said Shell was in breach of its legal duty of care under Dutch law due to its continued investment in new oil and gas fields and its inadequate climate policy for the period 2030 to 2050.
Imperial Brands Shares Fall on CEO Stefan Bomhard Retirement News
Imperial Brands shares slid after Chief Executive Officer Stefan Bomhard outlined plans to retire following five years at the helm.
The London-listed tobacco manufacturer said Wednesday that Chief Financial Officer Lukas Paravicini would step up as CEO on Oct. 1. Meanwhile, Bombard will continue to serve on the company's board until Dec. 31 and be available until May 2026 to support the transition.
Universal Music Nonexecutive Director Bill Ackman Resigns
Universal Music Group, the record label behind Taylor Swift, said Wednesday that Bill Ackman resigned from the board with immediate effect due to new executive and board obligations arising from his recent investments.
Ackman is chief executive officer of investment firm Pershing Square Capital Management, which has a 4.73% shareholding in Universal Music, according to LSEG Refinitiv.
Hapag-Lloyd Confirms Guidance But Warns on Uncertainty
Hapag-Lloyd confirmed its full-year guidance while cautioning that global trade conflicts and continuing disruptions in the Red Sea could significantly hit supply and demand in the container shipping industry this year.
The German shipping company, the world's fifth-largest container line by capacity, said it had a good start to 2025, but warned that the situation in the Red Sea and the impact of global tariffs and trade policies continue to be causes for concern, bringing with them considerable uncertainty.
Burberry Plans to Cut 1,700 Jobs to Tackle Luxury Slump
Burberry said it intends to slash around 1,700 jobs globally as it continues with restructuring in the midst of a wider spending downturn that is plaguing the luxury sector.
The British trench-coat maker said it would make organizational changes aimed at driving efficiency and profitability that are expected to unlock 60 million pounds ($79.8 million) of savings by fiscal 2027. This adds to the group's previously announced cost-cutting program of 40 million pounds.
GSK Buys Liver-Disease Treatment From Boston Pharmaceuticals for Up to $2 Billion
GSK will acquire liver-disease treatment efimosfermin from Boston Pharmaceuticals for up to $2 billion to expand its portfolio.
The British pharma giant said Wednesday that it will pay the U.S. biotech company $1.2 billion up-front, and that the deal includes potential success-based milestone payments of $800 million.
GLOBAL NEWS
U.S. Scraps 'AI Diffusion' Rule in Revamp of Biden-Era Chip Curbs
The U.S. has revamped Biden-era rules on artificial-intelligence chips, scrapping an unpopular measure in a move that could benefit major players like Nvidia.
The Department of Commerce said in a statement Tuesday that it is rescinding the "AI Diffusion Rule" on the grounds that it would have stifled American innovation, saddled companies with onerous regulations and undermined diplomatic relations with dozens of countries.
Wall Street's fear gauge just dropped with striking speed. What historically comes next for stocks?
Extreme volatility in the U.S. stock market has evaporated, with a popular gauge of investor anxiety now sending a bullish signal after the initial tumult surrounding President Donald Trump's sweeping tariffs settled down.
The Cboe Volatility Index VIX slipped Tuesday to 18.22 , according to FactSet data. That's after closing Monday at 18.4, below its long-term average of 19.5, to slide "solidly back in bull-market territory," said Nicholas Colas, co-founder of DataTrek Research, in a note emailed Tuesday. That marked "a good step toward a more normal investment environment."
Trump Meets New Syrian Leader After Announcing End of Sanctions
RIYADH, Saudi Arabia-President Trump met Syria's new president on the sidelines of a regional summit here after announcing that he would lift crippling economic sanctions on the war-torn country and signing a bevy of Saudi investment deals on the first day of his Middle East tour.
The encounter-which a U.S. official said got under way around 10 a.m. local time-is likely to mark a turning point in global acceptance of Syria's new leader, Ahmed al-Sharaa, an Islamist formerly aligned with Islamic State in Iraq and al Qaeda who is still designated by Washington as a terrorist. He came to power after leading the ouster of longtime dictator Bashar al-Assad in December.
Republicans Raise Concerns Over Trump's Plane Gift as He Heads to Qatar
WASHINGTON-Republican lawmakers on Tuesday expressed national-security concerns over the proposed $400 million plane that the Qatari ruling family wants to give to the U.S. for use as Air Force One, offering rare GOP resistance to a venture backed by President Trump.