Shares in Europe were falling Wednesday, with semiconductor companies driving losses following a U.S. tech selloff over AI bubble fears.
European bourses had made sold gains in the previous session, reacting positively to Russia-Ukraine developments , but concerns over the tech rally have taken root.
"An MIT report revealed that 95% of companies investing in generative AI have yet to see returns," Swissquote Bank said.
"The comments may have been a wake-up call for investors, sparking a sharp pullback in high-flying names."
On the data front, U.K. annual inflation rose to an 18-month high last month, likely giving caution to Bank of England policymakers on rate cuts.
EU inflation data were also on slate this morning.
Shares on the Move
European defense stocks dropped amid U.S. efforts to end the war in Ukraine.
Babcock, BAE Systems, Dassault Aviation, Hensoldt, Indra, Renk, Rheinmetall, Saab and Thales were among the fallers.
Economic Insight
The hotter-than-expected U.K. inflation reading presents a challenge for the Bank of England , Moneyfarm said.
"Persistent price pressures argue against premature rate cuts, while weakening growth and employment suggest the need for caution."
U.S. Markets:
Stock futures were lower as investors turned their attention to Federal Reserve plans for interest rates.
Fed meeting minutes were due for release today ahead of the central bank's annual gathering at Jackson Hole.
Madison Investments said Jerome Powell could attempt in his Friday speech to inject some uncertainty into rate-cut expectations.
Forex:
The dollar traded steady as investors waited for clues on the Fed's rate-cut plans.
Lombard Odier sees further weakness for the dollar ahead, shifting its view from neutral to negative.
Sterling rose after the U.K. inflation data.
With a peak in prices not anticipated until later in the year, the BOE's scope to cut interest rates will be "severely limited," Raymond James Investment Services said.
Monex Europe said sterling would probably struggle to sustain its appreciation.
A single data point was unlikely to materially alter the BOE bias toward cutting interest rates given a weak labor market.
An economic recovery was expected to push German government bond issuance volumes and 10-year Bund yields higher later this year and next, according to DZ Bank Research.
It forecast the 10-year Bund yield at around 3% by the summer of 2026. In the short term, the bank expected it to move slightly lower to around 2.60%.
DZ Bank continued to recommend buying 10-year Norwegian government bonds versus Bunds, expecting the yield spread between them to narrow.
The 10-year Treasury yield was broadly flat. DZ Bank Research's short-term forecast for the benchmark is around 4.4%.
Yields, however, may rise temporarily to around 4.9% over the coming six months due to an increase in the term premium and a temporary rise in inflation.
Energy:
Oil prices rose, recouping some gains lost in the prior session, with the most recent advances following a decline in inventories.
Despite near-term support from lower inventories, the longer-term outlook is bearish , MUFG said.
Metals:
Gold futures rose, though they remained stuck in a relatively narrow range of trading with few catalysts to move higher or lower.
Safe-haven demand for the precious metal was subdued as optimism over a potential Russia-Ukraine cease-fire grew.
EMEA HEADLINES
Europe Should Deepen Ties With Non-U.S. Trade Partners, Lagarde Says
Europe should deepen look to strengthen its relationships with trade partners outside the U.S., European Central Bank President Christine Lagarde said.
"While the U.S. is-and will remain-an important trading partner, Europe should also aim to deepen its trade ties with other jurisdictions, leveraging the strengths of its export-oriented economy," Lagarde told a panel at the World Economic Forum in Geneva on Wednesday.
Sweden Central Bank Stands Pat, But Says It Could Cut Again This Year
Sweden's central bank kept its benchmark interest rate in place as inflation continues to climb, but said it could resume cutting rates later this year.
The policy rate will be left at 2.00%, the Riksbank said Wednesday, in a decision widely expected by investors.
ASR Nederland Swings to Net Profit Boosted by Strong Growth Across Business
ASR Nederland swung to net profit for the first half of the year reflecting strong growth across all its segments.
The Dutch insurance group said Wednesday that net profit was 130 million euros, equivalent to $151.4 million, compared with a loss of 70 million euros for the same period a year earlier.
GLOBAL NEWS
U.S. Allies Still Waiting for Tariff Relief on Autos and Steel
TOKYO-In return for billions of dollars of investment pledges and promises to buy more American goods, U.S. allies in Asia and Europe say President Trump agreed to lower tariffs on key exports such as cars and steel.
Weeks later, they are still waiting.
Japan's Exports Fall for Third Consecutive Month
Japan's exports in July saw their biggest drop in over four years, falling for a third straight month amid concerns over the impact of U.S. tariffs.
Exports declined 2.6% compared with the same period a year earlier, following a 0.5% drop in June, according to the Ministry of Finance on Wednesday. Economists had forecast a 2.1% decline, according to a median estimate from data provider LSEG.
The Fed's July Minutes Could Show How Deep Divisions Run Ahead of September Meeting
Investors don't have to wait until Federal Reserve Chair Jerome Powell's Jackson Hole speech on Friday for clues about the central bank's next move.
The minutes for the July meeting of the Fed's policymaking arm, the Federal Open Market Committee, are due out Wednesday at 2 p.m. ET-and may offer an early read on whether officials will cut rates in September.
Elon Musk Pledged to Start a Political Party. He Is Already Pumping the Brakes.
The billionaire Elon Musk is quietly pumping the brakes on his plans to start a political party, according to people with knowledge of his plans.
Musk has told allies that he wants to focus his attention on his companies and is reluctant to alienate powerful Republicans by starting a third party that could siphon off GOP voters.
U.S. Is Prepared to Use Air Power to Support Planned European Force in Ukraine
President Trump signaled on Tuesday that the U.S. is prepared to use air power to support a European security force in Ukraine but ruled out deploying American ground troops.
Planning of the multination force to be sent to Ukraine if a peace settlement is reached accelerated on Tuesday, a day after Trump discussed the idea at the White House with Ukrainian President Volodymyr Zelensky and other European leaders.
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This article is a text version of a Wall Street Journal newsletter published earlier today.