European Midday Briefing: Shares Rise Tentatively As Oil Falls

MARKET WRAPS

Stocks:

European stocks were edging up Wednesday as lower oil prices buoyed sentiment, with the CAC gaining as luxury stocks recovered some of Tuesday's losses.

In Germany, the DAX index was lower after UBS downgraded SAP stock citing its agentic AI rollout progress. SAP shares were 3.8% lower.

The fall in the oil price weighed on energy majors and the FTSE index after reports Iran had resumed talks with Oman about opening the Hormuz Strait.

Iranian media also said the country wants to resume negotiations with the U.S. and Trump announced that all mines in the strait had been cleared.

"The market remains strikingly susceptible to rumors and media reports," SEB said.

Some investors said trading was quiet ahead of three driving factors-July's U.S. personal-consumption expenditures index Wednesday morning, Nvidia earnings after the bell and Federal Reserve Chairman Kevin Warsh's remarks at the Fed's Jackson Hole symposium Friday.

Standard Chartered reckoned that Warsh will aim to restore investor confidence that the Fed will do what it takes to lower inflation and "convey a sufficiently strong commitment to achieving inflation targets to reduce market term premia and fears of fiscal dominance."

First Abu Dhabi Bank expected Warsh to share his views on Fed communications reform, including the future of forward guidance, the Fed's balance sheet and forecasting frameworks.

Stocks to Watch

E.ON's share price opens an attractive opportunity, Berenberg said, lifting its rating on the stock to buy from hold and its target price to 21 euros.

"The fall in E.ON's shares creates an opening to invest in an attractive regulated utility that has the opportunity and financial firepower to sustain scaled-up growth and value-accretive investment in its German power networks."

European bank valuations still aren't expensive, but are no longer very cheap, Citi said, adding the sector was getting closer to the end of its current bull run.

Its top picks are ABN AMRO Bank, NatWest Group and SocGen.

Orsted shares reflect little value for its unsecured pipeline, and investors are effectively receiving a free growth option, Citi said as it upgraded the stock to buy from neutral and lifted its target price to 165 Danish kroner from 142 kroner.

Market insight

Goldman Sachs analysts saw little evidence that supply indigestion or impaired market function were key drivers of the move in long-end Treasury yields to multicycle highs.

"Removing additional long-end supply can alter the supply/demand balance, but buybacks do not address the fundamental drivers and macro risks that have been the primary factors behind higher long-end yields globally."

This week's decline in Treasury yields has largely tracked lower energy prices, reinforcing the idea that more benign macro conditions can sustain lower yields across the curve, they added.

U.S. Markets:

Stock futures were mostly lower with moves muted before the catalysts expected.

Forex:

The dollar traded marginally higher as investors awaited the release of the July PCE data at 1230 GMT, the Fed's preferred gauge of inflation.

The Jackson Hole symposium later this week will also be key for the dollar if Fed Chairman Kevin Warsh recommits to taming inflation.

Bonds:

Eurozone government bond yields declined, with the 10-year Bund yield slipping below 3.2% for the first time since Aug. 14.

The fall was driven by lower oil prices on news that Iran and Oman unveiled a joint framework to restore safer navigation on the Strait of Hormuz.

"If we do move closer to a deal, we could see some short covering at the long end of the curve," Jefferies said.

Jefferies' positioning indicators suggested close to stretched short positions in long-dated Bunds and Treasurys.

Commerzbank said that, "While Bunds richened both outright [pushing yields lower] and versus swaps, eurozone government bond [yield] spreads continue to struggle."

ING said the Treasury's decision to double buybacks of long-end securities continued to reverberate, but market talk will slowly morph toward a front-end focus as the Jackson Hole symposium approaches.

"While Treasury Secretary Bessent continues to boss the back end, or intends to, Chair Warsh would probably like to do the same on the front end, but has chosen to lie low for now."

Treasury yields mostly edged higher.

J.P. Morgan expected the Treasury's $70 billion auction of five-year notes on Wednesday to go smoothly, adding that the offer might benefit from favorable valuations.

Columbia Threadneedle Investments said Treasury borrowing needs remained substantial and, with bond auction sizes expected to remain steady into 2027, short-dated bills are likely to carry more of the burden.

Energy:

Oil prices held below $90 a barrel as a flurry of positive headlines around U.S.-Iran peace talks soothed traders.

Diplomats from Iran and Oman discussed a framework that would allow shipping to resume through the Hormuz Strait, the countries said in a joint statement.

Meanwhile, "anecdotal evidence suggests there is an increasing flow of vessels utilizing the Omani route through Hormuz," ANZ said.

Axios reported that around 40 ships transited the strait over the weekend, while The New York Times reported U.S. diplomats would return to the Middle East.

Metals:

New York gold futures traded broadly flat.

EMEA HEADLINES

Siemens Energy Plans to Spin Off Transformation of Industry Unit

Siemens Energy said it is preparing to spin off its Transformation of Industry division and is exploring potential ownership structures as it focuses on power generation and power transmission.

The German maker of energy equipment is reporting record orders and bumper profits amid a burgeoning U.S. data center sector. But as growth in its gas turbines and power transmission businesses accelerates, the Transformation of Industry unit is struggling to compete for capital, the company said. The hope is that a separation will give the business more flexibility and growth opportunities.

Trump Sends Nuclear Agreement With Saudi Arabia to Congress

President Trump has submitted a landmark nuclear accord with Saudi Arabia to Congress for review, but hasn't dropped his last minute condition that the kingdom normalize relations with Israel, an administration official said.

The move is expected to trigger months of intensive debate among lawmakers about how to boost the American nuclear industry while curbing the spread of weapons of mass destruction in the Middle East.

GLOBAL NEWS

Canada Hits Back at U.S. With Tariffs Targeting Midterm Hot Spots

OTTAWA-Canada plans to impose tariffs of up to 50% on roughly 700 American products in retaliation for new U.S. levies, Canadian officials said Tuesday, escalating tensions between two of the world's most closely integrated economies.

The Canadian tariffs were designed to protect domestic companies hit by a fresh set of hefty U.S. tariffs and to sting President Trump and his Republican Party as they head into a difficult midterm election in November, Canadian officials said. The new levies would go into effect Sept. 8, affecting about $20 billion worth of goods, or roughly 7% of total U.S. imports.

Warsh Wants to Track the Money Supply. It Keeps Flashing Red.

New Federal Reserve Chairman Kevin Warsh loves to talk about the supply of money in the economy and its effects on inflation. He won't like what the fresh data on it has to say.

The money supply hit $23.22 trillion in July, rising 5.41% from a year earlier. It is fastest the money supply has grown since mid-2022, and could make it harder for the Fed to bring down annual inflation to its 2% target.

Fed May Need to Tighten Soon Without Progress on Inflation, Fed's Collins Says

Boston Federal Reserve President Susan Collins said Tuesday it would be appropriate to tighten policy soon if evidence of sustained inflation progress doesn't materialize.

In a piece published by The Boston Fed ahead of the Fed's annual gathering at Jackson Hole, Wyo., Collins said she was comfortable with Fed's July decision to maintain interest rates at their current target range, but leaving them there will require continued evidence that inflation is cooling.

The Canadian Bad Cop on the Front Lines of the U.S. Trade War

TORONTO-Doug Ford came out swinging.

After trade talks collapsed and the U.S. imposed new tariffs on Canada last weekend, the Ontario premier urged his country to take a hard line with the U.S. President Trump, he said, was a "dictator," a "loser," the "king of bankruptcies" and could "kiss my ass."

Trump Senate Pick Darline Graham Wins GOP Runoff in South Carolina

Sen. Darline Graham narrowly won South Carolina's Republican Senate primary runoff Tuesday, after President Trump flexed his political muscles in the final days of the campaign to get her over the finish line.

With 99% of the vote counted, Graham had 52%, while Rep. Ralph Norman, who represents a district in the northern part of the state, had 48%, according to the Associated Press.

Druckenmiller's Surprising Critique of Bessent Was Delivered With the Help of AI

Wall Street was stunned Monday when Treasury Secretary Scott Bessent was taken to task by one of his friends and mentors: legendary hedge-fund investor Stanley Druckenmiller.

In an opinion article for The Wall Street Journal, Druckenmiller sharply criticized Bessent's move to intervene in the U.S. bond market, saying that stepping up government buybacks to bring down yields was a mistake. The Journal's opinion pages operate independently from the newspaper's newsroom.

Write to clare.kinloch@wsj.com

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August 26, 2026 05:15 ET (09:15 GMT)

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