European Midday Briefing: Shares Higher on Peace Hopes

MARKET WRAPS

Stocks:

Europe's blue-chip indexes were higher, with software stocks leading gains.

The DAX was supported by a 3.5% increase for SAP and Rheinmetall also rose at open.

The FTSE advanced with help from IG Group, which was up 7.4% after earnings, but London-listed miners fell as metal prices cooled.

Investors are watching for any signs of a resolution to the Iran war after Trump's comments about holding off attacking Iran Tuesday. Brent crude futures slipped but remained above $110 a barrel.

Navellier & Associates said that interest rates should come down meaningfully once flows through the Strait of Hormuz resume.

Until then, the pressure remains on higher inflation, it said, adding that any interest-rate cuts by the Federal Reserve would be postponed until the recent surge in energy inflation dissipates.

"If a month from now, flows haven't resumed through the Strait of Hormuz, energy prices will almost certainly be higher, fueling higher inflation and higher interest rates."

This will also create problems for the U.S. midterm election cycle, which has a long history of creating downward volatility, Navellier & Associates added.

"Trump is under pressure to 'fix' the Iran situation soon."

HSBC forecast more central banks to raise policy rates, adding that even if the Strait reopens swiftly, the risk of supply shocks and the impact on global inflation and growth would endure.

Raising interest rates now was more about credibility, it said, adding that the ECB and BOE could start in June or July, and if the Fed hiked rates, more emerging market economies could tighten policy.

Macquarie Group said that, even if the Fed moved to signal that it would adopt a neutral bias in June, it might not be enough to stabilize inflation expectations and long-term Treasury yields.

The Fed will have an opportunity to change its rhetoric decidedly toward hawkish with the small flurry of Fed speeches between now and June 6, it added.

U.S. Markets:

Markets were on course to open in the red as the chip-stocks rally that has powered gains for much of the year continued to lose steam.

Nvidia's earnings are due Wednesday and have the capacity to reignite the frenzy over AI chips.

They are widely expected to again show some big numbers but the company has set a high bar and with the other major players in the sector having already reported, the short-term future of this bull market could be in its hands.

Forex:

The dollar fell as markets stabilized after Trump said that he would hold off on a planned attack on Iran at the request of Gulf leaders.

"The news helped remove some of the risk premium that had built up over the course of yesterday," Deutsche Bank said.

Moves were limited, however, as the Middle East situation remains uncertain.

Sterling fell after higher U.K. unemployment and slower wage-growth data, which could dissuade BOE policymakers from raising interest rates for now.

A potential golden window for the internationalization of the yuan might be emerging , Citi said, pointing to geopolitical shifts and rising global yuan payments.

Yuan settlement in goods and commodity trade has risen sharply, accelerating amid the Iran war, with Iran and the United Arab Emirates signaling openness to yuan transactions.

Bonds:

Eurozone government bond yields edged lower as global bond markets stabilized.

Treasury yields edged lower with easing oil prices, but remained at elevated levels, signaling the lack of meaningful progress toward a Middle East resolution.

"The sell-off in global fixed income markets has stabilized in the last 24 hours with importantly the short-end of the USD curve even coming lower driving a slight steepening of the curve," Danske Bank said.

DZ Bank stood by its forecast of 3.20% for the 10-year Bund yield on a 12-month horizon , adding that investors scepticism regarding Germany's rising debt levels was a factor pointing to a sustained rise in yields.

The 10-year Treasury yield could rise further UOB said--based on the daily chart --adding that next resistance was at 4.809%.

Columbia Threadneedle Investments expects the ECB to be the first to raise rates at its June meeting, followed by the BOE in July.

Commerzbank considered eurozone government bond yields to be investable in the current environment , but the spillover risks needed to be monitored and steepening could return under most scenarios, it added.

Energy:

Oil recouped some losses following a 2% slide after Trump said he would hold off on an attack on Iran to make room for peace negotiations.

"The oil market continues to trade in wide ranges, and it remains extremely sensitive to Iran-related headlines," ING said.

"ICE Brent traded almost in a $6/bbl range yesterday."

Meanwhile, the U.S. extended a sanctions waiver allowing countries to purchase Russian oil currently stranded at sea for another 30 days--a move that analysts say will be welcomed by Asian buyers, who are more exposed to supply disruptions in the Middle East.

Gas

European natural-gas prices held above 50 euros a megawatt-hour as the Iran war dragged on, fueling concerns over global supply.

A tightening LNG market was already starting to weigh on Europe, with imports down 7% on year last month, as more shipments are being directed to Asia due to supply shortages, ANZ said.

Potential disruptions at Australia's Ichthys LNG plant due to a planned strike could worsen the situation and affect key buyers such as Japan and Taiwan.

Metals:

Gold prices held just above $4,500 , pressured by expectations of higher interest rates as the Iran conflict dragged on, and bullion was down more than 13% since the war began.

"Traders remain focused on the Middle East crisis and the inflationary impact of sustained higher energy prices," Saxo Bank said.

"Escalating tensions can weigh on gold through higher yields and a stronger dollar, while any credible path toward de-escalation or peace may ultimately support prices."

Copper

Copper fell, pressured by inflation concerns and weaker Chinese data, but despite the retreat, prices were still up more than 8% year-to-date.

"The pullback comes after a strong run, with prices slipping from the recent highs hit just last week amid intensifying macro headwinds," ING said.

U.S.-Iran tensions and higher oil prices have increased fears of persistent inflation and stricter monetary policy, which could hurt global growth and industrial demand.

In China, softer activity in investment, retail and industrial output added to concerns about the demand outlook.

EMEA HEADLINES

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GLOBAL NEWS

Japan's Economy Accelerated in First Quarter, Backing Case for Rate Hikes

TOKYO-Japan's economy continued to expand during the first quarter of 2026, backing the case for another interest-rate increase as the Middle East conflict raises inflation risks.

Real gross domestic product grew 0.5% in the January-March period from the previous quarter, preliminary government data showed Tuesday.

Australia's Central Bank Could Hold Rates as It Weighs Iran Impact

SYDNEY-The Reserve Bank of Australia said its third straight interest-rate increase gives it time to weigh the Iran conflict's impact on the local economy, signaling it could pause tightening at a time of heightened uncertainty.

The central bank raised the official cash rate to 4.35% at its May 5 board meeting, delivering a third consecutive 25 basis-point increase in an effort to dampen spending amid rising inflationary pressures.

See How the Global Government Debt Binge Is Rippling Through Markets

Recent strains in the global bond market are demonstrating a key problem confronting G-7 leaders at their meeting in Paris this week: how to manage a growing pile of government debt, accelerated by war and the pandemic.

(MORE TO FOLLOW) Dow Jones Newswires

May 19, 2026 05:14 ET (09:14 GMT)