European shares rally, oil retreats, all eyes on FOMC

European stock markets continued to climb on Wednesday, with investors feeling more optimistic as oil prices dropped, due to easing supply concerns, according to MarketPulse analyst Zain Vawda. This in turn aided overall sentiment and thus gave risk assets a boost, coupled with a bullish outlook by NVIDIA. The STOXX 600 index rose 0.5% to 605.59 points. This marks the third day in a row the main European index has gone up, its best performance in a month. The .SXEP (Energy) sector fell 0.3%, ending an eight-day winning streak because of lower oil prices. On the flip side, .SX7P (Financial) stocks were the biggest reason the overall market stayed positive. Markets around the world are recovering because oil prices stopped rising, despite the growing tension between Israel and Iran. This follows on from a strong Asian session where Japan’s stock market saw a strong recovery as the Nikkei climbed 2.87% to reach 55,239.4, effectively ending a four-day period of losses. Similarly, the Topix, which tracks a broader range of companies, rose 2.49% to finish at 3,717.41. The US dollar weakened for the third day in a row. The DXY dollar index, which compares the US currency against six other majors, dropped 0.04% to 99.51. In response, several other currencies gained value: the euro rose to $1.1543, while the Japanese yen strengthened to 158.64 per dollar. Sterling also saw a small increase to $1.3368. In the Oceania region, both the Australian dollar and the New Zealand dollar moved higher, reaching $0.7117 and $0.5868, respectively. The cryptocurrency market showed mixed results, as bitcoin fell 0.50% to $74,184.63, while Ethereum managed a slight gain of 0.04% to reach $2,329.46. Gold remained mostly stable on Wednesday as investors cautiously watched the Middle East conflict while waiting for the US Federal Reserve’s latest policy update. Spot gold and US gold futures both saw slight increases of 0.1%, reaching $5,008.58 and $5,012.60 respectively. While the ongoing Iran conflict has kept Brent futures above $100 for several days, prices finally retreated on Wednesday, dropping 1.46% to $101.91. Similarly, West Texas Intermediate crude fell 2.86% to $93.46. This dip in oil prices was largely driven by the restart of crude exports from Iraq’s Kirkuk fields to Turkey, following an agreement between Baghdad and the Kurdistan Regional Government. This provided some relief to a market worried about supply shortages, especially since Iraq aims to pump at least 100,000 barrels per day through the pipeline. Additionally, data from the API suggested a significant rise in US crude stocks by over 6.5 million barrels, a much larger increase than the 380,000 barrels predicted by a recent Reuters poll. Economic data releases It is a quiet day on the European calendar with the final release of the Euro Area CPI the highlight. Barring any surprise, it should be a quiet session with eyes turning to the US session. US PPI data will kick things off following the Bank of Canada rate decisions where markets expect the BoC to hold rates firm. The Federal Reserve meeting will then be the focus where the Fed is expected to keep interest rates steady, but there is a strong possibility they will adjust their “Dot Plot” projections to show no rate cuts for 2026. If the median forecast shifts from one cut to zero, the US dollar will likely see a boost. Conversely, the market might still hope for a rate cut if the Fed’s statement highlights “downside risks” regarding the job market. Chair Jerome Powell is unlikely to give firm guidance on how the Middle East conflict affects inflation and growth, as commodity markets remain too volatile. While the dollar may see a brief rally following the Fed’s new projections, its value will likely stay tied to fluctuating oil prices and geopolitical news.   Follow Zain on Twitter/X for Additional Market News and Insights @zvawda (Source: MarketPulse) The post European shares rally, oil retreats, all eyes on FOMC appeared first on Financial Mirror.