MARKET WRAPS

Watch For:

France industrial production; trading update from Inditex

Opening Call:

European stock futures traded lower early Wednesday. Asian stock benchmarks were mixed; the dollar was little changed; Treasury yields edged higher; oil futures rose; while gold fell.

Equities:

Stock futures point to a weaker open in Europe on Wednesday.

Brent is nearing the psychologically important $100 level amid escalating hostilities in the Middle East. The U.S. attacked Iranian oil tankers on Tuesday in response to fresh attempts by Iran to strike U.S. warships in the Middle East in recent days.

Kim Fustier, senior global oil and gas analyst at HSBC, said that her new base case now assumes that a U.S.-Iran understanding will emerge but be vulnerable to repeated breakdowns.

Forex:

FX markets are reluctant to put on fresh directional positions ahead of U.S. data later this week, OCBC Group Research's Christopher Wong said. The latest escalation in the Middle East conflict "keeps the inflation and Fed policy implications of higher energy prices in focus," Wong added.

Bonds:

The U.S. Treasury will need to impress with the announcement of increased long-term bonds buybacks, said PGIM's Robert Tipp. The department will announce Wednesday morning the size of Thursday's 10-year to 20-year bond buybacks. The original plan was to buy back up to $2 billion, but Secretary Bessent has said it will be at least twice as much, in an attempt to lower long-term yields.

"They will need to come in...and favorably impress the market with their aggressiveness in order to get follow-through," Tipp said. He expects yields to remain with a range for the time being.

Energy:

Oil gained early Wednesday as Houthi militants' attack on Saudi Arabia's energy infrastructure amplifies fears over supply disruptions in the Middle East.

"If skirmishes curbing oil flows continue into year end, Brent could trade in a $95-120 a barrel range. Meanwhile, a broader conflict resulting in major energy infrastructure damage may spike prices as high as $150 a barrel," Bank of America said.

Metals:

Gold fell in Asia. Upcoming U.S. PPI and CPI data are likely to set the tone around rate-hike expectations, said Critical Metals' Tony Sage. A hawkish reading of the two data releases could lift bond yields and weigh on gold's gains, he said, while softer inflation could lead to rate-hike bets being pared back.

"Traders will also watch developments in the Middle East and oil prices, which remain a source of risk," he said. Copper prices fell amid profit-taking. Strong demand and supply-side issues have sent prices to record highs, ANZ said. The metal has rallied more than 17% this year.

Demand in China is expected to pick up as the market enters a traditional peak season for manufacturing, ANZ said. Iron ore declined in Asian trading, weighed by sluggish demand recovery due to poor mill profitability, Baocheng Futures said.

The supply-demand landscape for iron ore hasn't improved significantly, while steel mill production has stabilized and end-user consumption has rebounded from lows thanks to preholiday restocking. Arrivals at Chinese ports have surged and overseas supply remains robust, pushing overall supply to high levels.

TODAY'S TOP HEADLINES

Trump Signs Orders to Ban Some Canadian Products From U.S. Market

President Trump on Tuesday signed orders to ban the importation of many dairy products, alcoholic beverages and motorcycles from Canada in three weeks-a retaliation for Canadian tariffs that took effect earlier the same day.

Trump also modified the scope of some existing 50% tariffs on Canada, removing levies on cement, road salt and some hospital products, while imposing 50% levies on other products including some all-terrain vehicles, boats and cheeses.

Bank Preferred Stocks Are Sending a Warning About Interest Rates

Preferred shares issued by major U.S. banks such as Bank of America Corp. and Wells Fargo & Co. differ sharply from their common stock. They typically carry a fixed dividend that must be paid before any common dividend, rank senior in the capital structure during liquidation, and generally confer no voting rights.

Because most bank preferreds are perpetual and trade like long-duration bonds, their market prices are highly sensitive to interest-rate expectations rather than the banks' earnings growth. Consequently, the recent behavior of these securities provides an important indication of the rate outlook.

U.S. Strikes Iranian Oil Tankers in Response to Tehran's Attacks on Navy Ships

The U.S. destroyed five Iranian oil tankers on Tuesday in response to fresh attempts by Tehran to strike U.S. warships in the Middle East in recent days, according to U.S. Central Command.

Since Friday, Iran has fired ballistic missiles at a U.S. aircraft carrier, Navy destroyers and at least one Marine ship, according to U.S. officials familiar with the attacks. All of the attacks have failed, Centcom said, but officials described some of them as close calls.

The AfD Is Trying to Turn Its First State Government Into a Far-Right Policy Lab

BERLIN-After Alternative for Germany's big state-election win in eastern Germany on Sunday, the party is as close as it has ever been to actually governing. If it succeeds, it intends to launch one of the most ambitious far-right policy experiments in Europe this century.

The party, known by its initials, AfD, sees the state of Saxony-Anhalt as a showcase for its ideas on immigration, education, culture and demographics, which in some cases would represent a sharp departure from the approach of mainstream political parties.

Anthropic Researcher Quits Over 'Out-of-Control' AI Fears

An Anthropic researcher is quitting the artificial-intelligence industry over fears that the lab and its competitors are racing to build systems they won't be able to control, a sign of mounting safety concerns within top AI companies.

Jacob Coxon, a researcher who specializes in training new AI models by having them consume vast amounts of data, said Tuesday that he is leaving the company because he doesn't want to participate in an industrywide rush to build AI systems that can improve themselves, worried such systems could spiral out of control and destroy humanity.

Amazon Plane's Systems Weren't Deployed to Slow Jet Before Crash, Investigators Say

Two systems that could have slowed an Amazon Air flight that crashed in Miami over the weekend weren't deployed before the plane careened off a runway and crashed into nearby vehicles, investigators said late Tuesday.

The National Transportation Safety Board didn't find evidence on one of the plane's black boxes that the Boeing 767's speed brakes, which are panels that create aerodynamic drag, or thrust reversers, which redirect air to lower the plane's speed while landing, were deployed, lead investigator Chihoon Shin said at a news briefing.

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Expected Major Events for Wednesday 04:30/NED: Jul Consumer Spending

06:00/FIN: Jul Foreign trade

06:00/ROM: Jul International trade

06:00/NOR: Aug PPI

06:45/FRA: Jul Industrial production index

07:00/SVK: Jul Industrial production

09:00/MLT: Jul International Trade

09:00/CYP: Jul Foreign Trade (provisional)

09:00/GRE: Aug CPI

10:00/POR: Jul International trade statistics

10:00/IRL: Jul Industrial Production and Turnover

15:59/UKR: 2Q GDP

15:59/UKR: Aug CPI

16:59/POL: Polish interest rate decision

23:01/UK: Aug RICS Residential Market Survey

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