Before we get going on the markets, here’s a recap from around the world overnight via Daniela Hathorn, Senior Market Analyst at capital.com.
“Markets have turned more defensive this morning as renewed Middle East tensions, rising oil prices and persistently elevated bond yields put pressure on risk appetite. Wall Street finished lower on Wednesday, while Asian and European equities have extended the weakness today. The broader equity rally remains supported by strong earnings expectations and AI investment, but the increasingly narrow leadership is leaving markets exposed to shifts in the rates outlook.
“Meanwhile, Brent has surged towards $US104 as attacks on commercial vessels around the Strait of Hormuz intensify, including a tanker strike off Qatar. Reports that Washington is considering further military action against Iran have added to the uncertainty, while Hurricane Isaias is threatening production in the Gulf of Mexico.
“Furthermore, Wednesday’s Fed minutes reinforced the central bank’s hawkish bias, although the key takeaway is seemingly a lack of appetite for continued rate hikes. Most policymakers still anticipate another rate hike before year-end, despite softer employment data suggesting the labour market is losing momentum, but these are seen as an insurance against sticky inflation rather than the start of a new tightening cycle.
“Europe is facing an additional layer of pressure from sovereign debt markets. Borrowing costs remain elevated amid fiscal and political uncertainty, highlighting the increasingly difficult environment for governments already struggling with weak growth and expensive debt servicing.
“The rise in energy prices is particularly problematic for Europe, where it threatens household purchasing power and corporate margins while limiting central banks’ ability to support growth. This creates a more challenging backdrop for European equities, especially domestically exposed and highly leveraged businesses.”