European Shares Set To Extend Losses On Rate Hike Bets

(RTTNews) - European stocks look set to extend losses from the previous session on Wednesday as inflation worries returned to the fore following fresh strikes between the U.S. and Iran.

With Eurozone inflation reaching a near three-year high in August and unlikely to return to target over the medium term, a 25-basis point ECB rate hike on September 10 looks almost certain.

Federal Reserve Governor Michael Barr said in a speech on Tuesday that he would back a rate hike if inflation doesn't cool quickly.

According to the CME FedWatch tool, the chance of a quarter-point rate hike at the Fed's September 15-16 meeting now stands at 68.2 percent.

With inflation still running above the Fed's 2 percent target, Friday's U.S. payrolls report along with the release of August CPI data on September 11 may offer additional clues on the Fed's rate trajectory going forward.

Asian markets were moving lower, with tech-heavy Kospi and Nikkei leading regional declines after U.S. chipmaker Nvidia reportedly struck a deal to buy open-source AI company Hugging Face for $12.9 billion.

In another significant development, Dell Technologies boosted its annual revenue forecast by $25 billion in a further sign of surging demand for servers to run artificial intelligence tasks.

The dollar held firm in Asian trade while gold prices fell toward $4,300 an ounce amid indications that higher long-end Treasury yields are unlikely to retreat anytime soon.

Brent crude futures rose toward $96 a barrel, extending gains for a third consecutive session to the highest level in nearly six weeks as escalating fighting between the U.S. and Iran heightened concerns over further disruptions to energy flows through the Strait of Hormuz.

Tehran launched missile and drone attacks towards U.S.-linked sites in Bahrain, Jordan and Kuwait in defiance of a warning from U.S. President Trump that any retaliation would see Iran "hit much harder" and that the U.S. is still holding out on "the biggest attack of them all."

During a G20 finance ministers' meeting, U.S. Treasury Secretary Scott Bessent explained that the Strait of Hormuz "will be bypassed within two years," predicting that the waterway would become "like a worthless lake" as oil flows are shifted to land routes.

U.S. stocks closed lower for the third straight day overnight while the yield on the benchmark ten-year note hit a 20-month high amid increased tensions in the Middle East.

Brent crude futures rose 4 percent above $94 a barrel after U.S. Central Command announced a fresh wave of attacks against IRGC targets, citing Tehran's attempts to lay mines in the Strait of Hormuz and an earlier attack on a U.S. military base.

Tehran warned it would prevent oil exports from the Gulf, adding to uncertainty around energy supplies.

Economic data offered little relief, with U.S. manufacturing activity easing in August, job openings in July coming in softer than expected, and residential construction spending declining in the month.

The tech-heavy Nasdaq Composite lost 1 percent, the Dow shed 0.8 percent and the S&P 500 declined 0.7 percent.

European stocks closed lower on Tuesday, pressured by a fresh rise in government bond yields as tensions in the Middle East escalated and data showed Eurozone inflation climbed to a three-year high of 3.3 percent in August on higher energy costs.

The pan-European STOXX 600 fell 0.6 percent to a more than one-month low. The German DAX lost 1.1 percent, France's CAC 40 dipped 0.4 percent and the U.K.'s FTSE 100 eased 0.3 percent.