MARKET WRAPS

Stocks:

European shares fell while oil prices rose Thursday on little sign of progress in U.S.-Iran talks.

European bond yields began the day higher, following yesterday's Treasurys selloff which accelerated following better-than-expected U.S. purchasing managers' data for September.

Meanwhile, oil prices -which have moved in lockstep with Treasury yields in recent weeks- ticked higher, with Brent crude trading above $104 a barrel.

Central banks in Europe have responded in diverging ways to the prolonged period of high energy prices, with Switzerland and Sweden holding their key rates Thursday but Norway tightening borrowing costs.

In the U.K., the need for a rate rise by the Bank of England will grow if energy prices remain high, unless the economy weakens, Deputy Governor Clare Lombardelli said.

For the day ahead, Chinese leader Xi Jinping is making his first visit in a decade to the White House to meet with Trump. While investors will be watching for information on a number of topics, the elephant in the room will be the country's continuing support for Iran.

Economic insight

In Germany, business sentiment rose for a fifth straight month to its highest level since 2023.

U.S. Markets:

Futures were down with both the Dow and the Nasdaq tracking lower, as investors expect further hikes to Fed rates.

The Fed is likely to raise interest rates twice more this year before an extended pause in 2027, PGIM said. Abu Dhabi Bank and Goldman Sachs Asset Management, however, don't foresee a raise.

Forex:

The dollar traded flat but remained firm after reaching an eight-week high against a basket of currencies on Wednesday, driven by the prospect of further U.S. interest-rate rises.

The Swiss franc fell after the Swiss National Bank kept interest rates at 0%, as expected.

The Swedish krona rose after the Riksbank held interest rates at 1.75%.

Bonds:

Eurozone government bond yields opened higher in response to a significant 10-15 basis point rise in Treasury yields in U.S. trading hours on Wednesday.

Treasury yields edged higher.

Yields on U.K. government bonds rose due to rising oil prices as energy supply disruptions persist.

Energy:

In early European trading, Brent was up 0.2% and WTI futures rose 0.1%

Gas

European natural-gas prices rose as market focus remained on storage levels ahead of the winter heating season.

Metals:

Gold prices were broadly muted, hovering around $4,300 a troy ounce as expectations that the Federal Reserve could raise interest rates further weigh on the nonyielding asset.

EMEA HEADLINES

Schneider Electric to Launch Bid for Shelly Group in $1.4 Billion Deal

Schneider Electric plans to launch a takeover bid for smart-device maker Shelly Group that values the company at around 1.2 billion euros ($1.37 billion).

The two companies said they have entered an investment agreement in connection with a 70-euro-a-share offer. Shelly Group shares closed Wednesday at 64.40 euros.

Delivery Hero Cancels CEO Exit Plans Due to Uber's $14.8 Billion Takeover Bid

Delivery Hero scrapped plans for co-founder Niklas Östberg to step down as chief executive, citing Uber Technologies' $14.8 billion takeover bid.

The German food-delivery company had said in May that Östberg would step down in March of next year under plans for a leadership transition.

Arnault Family Moves to Cement Control of LVMH in Ownership Overhaul

France's Arnault family intends to simplify the structure of the companies that hold LVMH, a move designed to secure the clan's long-term control over the luxury conglomerate.

Under the plan, Bernard Arnault's Financiere Agache will take control of LVMH after holding company Christian Dior SE is delisted.

German Business Sentiment Climbs to Highest Level in Three Years

German business sentiment rose for a fifth straight month in September to its highest level since May 2023, as the country's tentative economic recovery holds.

The Ifo Institute said Thursday that its business-climate index, based on around 9,000 monthly responses from businesses, increased to 89.9 in September from 88.8 in August. That was a little better than consensus expectations of 89.0 by economists polled by The Wall Street Journal.

GLOBAL NEWS

Central Banks Diverge on Rates as Energy Prices Threaten Higher Inflation

Central banks in Europe have responded in diverging ways to the prolonged period of high energy prices, with Switzerland and Sweden holding their key rates Thursday but Norway tightening borrowing costs.

The Swiss National Bank left its main interest rate unchanged as expected at 0% for the fifth straight quarterly meeting, while the Riksbank continued to hold its rate at 1.75%, where it has been since last September. The Norges Bank raised its key rate to 4.5% from 4.25%.

German Business Sentiment Climbs to Highest Level in Three Years

German business sentiment rose for a fifth straight month in September to its highest level since May 2023, as the country's tentative economic recovery holds.

The Ifo Institute said Thursday that its business-climate index, based on around 9,000 monthly responses from businesses, increased to 89.9 in September from 88.8 in August. That was a little better than consensus expectations of 89.0 by economists polled by The Wall Street Journal.

Trump-Xi Summit: Here's the Current State of the AI Battle

As the U.S.-China summit gets under way, the world's two biggest economies are locked in an artificial-intelligence arms race. Leadership on both sides believe future economic and military supremacy rides on mastery of the technology. On the Chinese side, the government is willing to subsidize the AI infrastructure to advance its agenda.

The first area of competition is in AI models. The best models are still made by two U.S. companies, OpenAI and Anthropic. Their current top offerings represent a big step up in capabilities from previous generations and can work on problems for a long time, persistently plugging away until they get the solution. They are particularly good at advanced math, coding, plus both hacking and cyber defense.

BOE Rate Rise Increasingly Likely If Energy Prices Stay High, Deputy Governor Says

The need for a rate rise by the Bank of England will grow if energy prices remain high, unless the economy weakens, Deputy Governor Clare Lombardelli said Thursday.

The central bank last week left its key interest rate unchanged, diverging from its peers, which have all lifted borrowing costs since energy prices jumped in response to the U.S.-Iran war.

Canada's Carney Open to U.S. Trade Deal but Won't Give Up Right to Deepen EU Ties

UNITED NATIONS-A mutually beneficial trade pact between Canada and the U.S. is still possible, Canadian Prime Minister Mark Carney said, but his country won't give up its freedom to strike deals with the European Union and other parts of the world as it seeks to diversify global connections and protect its national sovereignty.

Trade talks between Washington and Ottawa collapsed in August, with President Trump imposing steep tariffs and Canada retaliating with levies of its own. In an interview with The Wall Street Journal, Carney indicated that some progress had been achieved since then, but not enough to clinch a deal.

Ukraine's Economy Hampered by Black Sea, Energy Disruptions, Says EBRD

An agreement with Russia to halt attacks on energy infrastructure would deliver a significant boost to Ukraine's battered economy, as would the restoration of grain exports through the Black Sea, the European Bank for Reconstruction and Development said Thursday.

In a report on the outlook for the economies in which it invests across parts of Europe, Asia and Africa, the development bank lowered its growth forecasts for Ukraine to reflect the damage caused by continued Russian attacks on its energy system. Ukraine has in turn attacked Russia oil refineries, causing shortages of fuels.

Iran Has a Secret Weapon in Its War With America: Help From China

This summer, when the U.S. and Iran signed a temporary truce, China touted its role in easing tensions in the Middle East. It said its foreign ministry made dozens of calls to nudge peace along, and that President Xi Jinping himself had intervened with suggestions to end the fighting.

That same day, a plane from China landed in Tehran. It carried a shipment for Iran's Ministry of Defense that included electronics components that can be used to make parts for drones and missile guidance systems, according to Iranian customs data analyzed by The Wall Street Journal.

Eight Navy Personnel Assigned to USS Lincoln Strike Group Attempted Suicide

Eight Navy personnel assigned to the USS Abraham Lincoln carrier strike group attempted suicide during its lengthy deployment in the fight against Iran, according to a letter the acting Navy secretary sent to a Democratic senator.

Acting Navy Secretary Hung Cao discussed the attempted suicides in a Tuesday letter to Sen. Kirsten Gillibrand (D., N.Y.), who had asked about suicide attempts, mental-health resources and living conditions on the ship.

Write to nina.kienle@wsj.com