European shares muted as investors assess Iran-Oman talks, US inflation

EUROPEAN shares were muted on Wednesday (Aug 26), as investors assessed talks involving Iran and Oman over the Strait of Hormuz, while sticky US inflation data marginally increased expectations of a Federal Reserve rate hike next month.

A senior Iranian source said that Teheran and Oman were still working on the details of an agreement on the Strait of Hormuz - the waterway that handled one-fifth of global oil and gas shipments before the US-Iran conflict began.

“That (talks) gives a bit of hope that at some point the solution will be found. But this (uncertainty), we see it more as a risk than something that we really incorporate in our forecasts,” said Joost Van Leenders, senior investment strategist at Van Lanschot Kempen Investment. The reopening of the waterway, however, still hangs on the US meeting Iran’s conditions.

While crude prices have slipped below US$90 a barrel in recent days, elevated prices of petrol and refined oil products have kept inflation very much in focus in Europe.

The pan-European Stoxx 600 closed 0.01 per cent lower at 656.41 points. The European economy has remained resilient and fared better during the energy shock than anticipated, keeping investors optimistic.

“What’s positive for Europe is it looks like consumers have begun to be more confident, and enough to lower their saving rates, so spending a little bit more, supporting growth in that sense,” added Leenders.

In the US, a hotter-than-expected Personal Consumption Expenditure report — the Fed’s preferred inflation gauge — modestly increased expectations for the central bank to hike rates in September.

Among sectors on the Stoxx 600, European banks led gains with a 1 per cent rise, as Deutsche Bank advanced 4.3 per cent to reach its highest since July 2011. Commerzbank gained 2.8 per cent.

German Finance Minister Lars Klingbeil plans to meet UniCredit CEO Andrea Orcel, sources said, in Berlin’s first direct engagement over the lender’s pursuit of Commerzbank. 

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US stocks: Wall Street stocks end tad lower after hot inflation data ahead of Nvidia earnings

European Central Bank policymakers are ready to raise rates at their September meeting to counter the economic effects of the Iran war, though they are reluctant to signal further tightening beyond that, three sources told Reuters.

Investors are also awaiting Nvidia’s second-quarter earnings, due later in the day, for clues on whether the AI-driven spending boom can continue to justify lofty market expectations.

Tech shares fell 0.8 per cent, while healthcare shares led losses, falling 1 per cent. Among individual stocks, Britain’s Hochschild Mining climbed 5.4 per cent, among the top gainers on the benchmark as a surge in gold prices this year boosted first-half revenue.

SAP fell 2.9 per cent and was the biggest drag on the benchmark after US software maker Intuit issued a disappointing forecast, while UBS downgraded the German software group to “neutral”. REUTERS