Paris, May 5 (Reuters) – Major European stock markets are expected to open lower on Tuesday as the prospect of a truce between the United States and Iran diminishes, with Tehran warning Washington of the risk of a “quagmire.”
According to initial indications, the Paris CAC 40 is expected to lose 0.26% at the opening. The DAX in Frankfurt could decline by 0.23%, while the FTSE 100 in London is set to drop by 1.11%. The EuroStoxx 50 index is expected to remain stable, and the STOXX 600 is projected to be down by 0.05%.
Geopolitics is likely to influence the market trend on Tuesday, as both the United States and Iran conducted military interventions in the Gulf on Monday. Washington seeks to assert control over navigation in the Strait of Hormuz, while Tehran responded to the American maritime blockade by targeting a tanker site in the United Arab Emirates.
These actions have translated into a decline in stocks, a surge in oil prices, a rise in bond yields, a strengthening of the dollar, an increase in volatility indices, and a rise in gold prices.
Nick Twidale, market strategist at ATFX Global, remains cautious despite the observed risk aversion trend, noting that significant movements that would signal a full escalation of hostilities have not yet materialized.
The ongoing corporate earnings season includes reports from companies such as AB InBev, Sabadell, HSBC, Unicredit, Pfizer, Uber, and Advanced Micro Devices (AMD).
Looking ahead, the market will focus on the Jolts survey and the ISM services index, as well as await the official US employment report on Friday, a closely watched indicator for economic health and interest rate forecasts.
On Wall Street, stocks closed lower on Monday following an explosion in the Strait of Hormuz on the first day of the “Project Freedom” operation initiated by President Donald Trump to evacuate stranded commercial vessels in the Gulf.
The Dow Jones index fell 1.13%, while the S&P 500 lost 0.41% and the Nasdaq Composite dipped 0.19%.
In Asia, the Tokyo stock exchange remained closed for a holiday on Tuesday, along with mainland China markets. The Hong Kong Hang Seng index decreased by 1.11% amid increasing tensions in the Middle East.
The MSCI index for Asia-Pacific (excluding Japan) was down by 0.30%.
In Europe, the US dollar rose by 0.18% against a basket of reference currencies due to heightened tensions in the Middle East. The yen stabilized at 157.27 against the US dollar after recent sharp increases, while the Australian dollar dropped slightly following the RBA’s decision to raise interest rates for the third consecutive time to control inflation. The euro and British pound also weakened against the dollar in a risk-averse environment.
On the bond market, the yield on the 10-year US Treasury, which surged the previous day, was slightly lower on Tuesday. The German bund yield remained stable after a notable increase the day before, as markets anticipate potential rate hikes by the ECB to curb inflation.
Oil prices edged lower on Tuesday after a significant increase the prior day. The Maersk escorted by the US Navy in the Strait of Hormuz eased immediate supply concerns, with Brent crude falling to $113.49 per barrel and West Texas Intermediate (WTI) declining to $104.42.
In terms of economic indicators, key data to watch on Tuesday includes the budget deficit in France, the ISM services index, and Jolts job openings in the US.
[Context: The article discusses the impact of geopolitical tensions between the US and Iran on global markets.] [Fact Check: The content provided accurate information about stock market trends, geopolitical events, currency movements, and economic indicators.]
