Ukrainian military personnel prepare a Leopard 2A4 tank ahead of a training exercise conducted by the Spanish military, at the San Gregorio military base outside Zaragoza, Spain, on Monday, March 13, 2023.
Paul Hanna | Bloomberg | Getty Images
LONDON — European stocks opened lower on Wednesday as global market sentiment wavered.
The pan-European Stoxx 600 was trading 0.3% lower by 8:20 a.m. in London (3:20 a.m. ET), with most sectors and all major regional bourses in negative territory.
Regional bourses traded higher on Tuesday as global markets reacted broadly positively to the outcome of talks between U.S. President Donald Trump, Ukrainian President Volodymyr Zelenskyy and European leaders at the White House on Monday. Defense stocks were among the worst performers in the index, however.
The sector extended its losses in early trade on Wednesday, with the Stoxx Europe Aerospace and Defense index shedding 0.9% in early morning trade. During Tuesday’s session, the index had moved 2.6% lower.
German defense contractors Rheinmetall and Hensoldt fell 1.8% and 1.9%, respectively, on Wednesday morning. Britain’s Rolls-Royce, down 1.9%, and Qinetiq, 2% lower, were also among the worst performers in the sector.
“Speculation about a diplomatic breakthrough meant that European assets saw some sizeable moves [on Tuesday], particularly those most affected by the conflict,” Deutsche Bank’s Jim Reid said in a Wednesday morning note. “Indeed, it was notable that defence stocks really struggled yesterday, and Rheinmetall (-4.85%) posted the worst performance in the German DAX (+0.45%) yesterday, despite being the strongest performer over 2025 as a whole given the wider ramp up in defence spending.”
Markets are also reacting to U.K. inflation which came in at a hotter-than-expected 3.8% for the year to July.
The British pound rose slightly against the U.S. dollar after the U.K. inflation print was published, before paring its gains to trade flat against the greenback.
British pound versus U.S. dollar
In a note after the inflation data was released, Sanjay Raja, chief U.K. economist at Deutsche Bank, attributed the surprise to Britain’s Office for National Statistics collecting its price data later than usual, meaning it coincided with school summer holidays.
“Prices for airfares and sea-fares tend to be more volatile later in July as demand picks up,” he said. “In fact, according to the ONS airfares were up a staggering 30% m/m – the highest monthly increase going back to 2001.”
He argued that this would likely unwind within the next month or so, but conceded that “there’s more upward momentum left.”
“We expect inflation to push a little higher to near 4% y/y in September, before slowly grinding its way lower through the course of the year,” Raja said. “What’s more, we think that the path to 2% CPI next year looks narrower. We expect CPI to sustainable return to target around 2027.”
That, Raja added, left the Bank of England grappling with “an uncomfortable trade-off,” where its policymakers were weighing high price momentum against a sluggish labor market.
Globally, Asia-Pacific markets fell overnight, tracking Wall Street declines in Tuesday’s trading session. S&P 500 futures were near flat overnight ahead of the release of the Federal Reserve’s July meeting minutes.
At the time, policymakers once more held steady on interest rates, but Fed Governors Christopher Waller and Michelle Bowman dissented, marking the first time two voting Fed officials have done so since 1993.
Traders are also focusing on key speeches from Fed officials when they convene in Jackson Hole, Wyoming, for the Fed’s annual economic symposium on Thursday. Investors are awaiting clues from Fed Chair Jerome Powell as to what will happen at the central bank’s remaining policy meetings this year.
The Fed funds futures market is indicating an 84.9% chance for a quarter-point rate cut at the Fed’s next policy meeting in September, according to CME’s FedWatch tool.
— CNBC’s Alex Harring contributed to this report.
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