Shares dip amid uncertain US role in Israel-Iran conflict

Equity markets ended modestly lower on Wednesday as the Federal Reserve concluded its June policy meeting with no change to interest rates, in line with expectations. Technology and utility shares led the gains, while energy and communication sectors underperformed. Investor sentiment was weighed down by a more cautious tone from the Fed, which signalled a slower pace of rate cuts amid persistent inflation risks and uncertainty surrounding US tariffs. The Fed's updated projections continue to indicate two rate reductions this year, but fewer cuts are now expected in 2026 and 2027, reflecting a longer path to achieving the 2 percent inflation target. Rising Treasury yields, with the 10-year yield climbing to 4.39 percent, reflected the market's reassessment of inflation pressures and future monetary easing.

Elsewhere, European equities closed broadly lower following eurozone inflation data, which showed a 1.9 percent annual rise in May, just below expectations. Asian markets were mixed, with investor focus shifting to escalating geopolitical tensions in the Middle East. The US dollar strengthened against major global currencies, while oil prices rose on renewed fears of supply disruption from ongoing Israeli Iranian air strikes. Despite a soft core inflation reading for May and a dip in weekly jobless claims, investors remain cautious. Sluggish housing data and weakening employment momentum suggest cooling US economic activity, yet strong wage growth continues to support consumer spending. As markets await more clarity on the impact of impending tariffs and inflation trends, volatility is likely to persist.

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Asian equities broadly declined today, led by sharp losses in Hong Kong and Japan, as geopolitical tensions escalated following reports the US may be preparing for a military strike on Iran. Investor sentiment was further dampened by the Federal Reserve's cautious stance on interest rates and warnings of rising inflation driven by trade tariffs, while weak Australian jobs data kept the ASX 200 flat.

US equity futures fell on Wednesday evening, with S&P 500 and Nasdaq 100 futures down 0.4 percent and 0.5 percent respectively, amid renewed geopolitical tensions following reports of possible US military action against Iran. The declines came ahead of the Juneteenth holiday, which will see US markets closed on Thursday, with trading set to resume on Friday.

European shares ended slightly lower on Wednesday, with the STOXX 50 and STOXX 600 each down 0.4%, as investors weighed monetary policy signals and geopolitical tensions. Tech and industrials led the losses, with Adyen, Infineon, and Siemens declining, while Santander gained 0.4% on news of its interest in acquiring UK’s TSB.

The US dollar strengthened further this morning, with the dollar index climbing above 99, bolstered by the Federal Reserve’s cautious stance and rising safe-haven demand amid escalating geopolitical tensions. The euro slipped to 1.1463 against the dollar, pressured by diverging monetary policy outlooks and growing market unease over potential US military action in the Middle East.

Oil prices slipped in volatile trading on Thursday as uncertainty over potential US involvement in the Israel-Iran conflict and a stronger dollar weighed on sentiment. While crude briefly recovered on reports of a possible US strike, gains were limited by the dollar’s strength and concerns over slowing US economic activity.

Equities on the move

The following companies experienced moves in their share price driven by analyst ratings, quarterly earnings, or other news:

Texas Instruments will invest $60 billion to expand U.S. manufacturing with seven chip facilities in Texas and Utah, calling it the largest foundational semiconductor investment in U.S. history. Backed by a $1.61 billion subsidy, the move aims to boost domestic chip production amid political pressure and competition, with projects underway and no change to long-term plans.

Barclays and Banco Santander have shown early interest in acquiring TSB, the UK unit of Banco Sabadell, according to a Reuters report on Wednesday. A potential sale could help Sabadell fend off a hostile takeover bid from rival BBVA by removing a key asset, though talks remain at a preliminary stage with no formal offers made.

Alphabet’s Waymo has applied for a permit to test autonomous vehicles in New York City, aiming to collect data and evaluate its technology despite regulatory hurdles that currently restrict fully autonomous ride-hailing services. The move signals potential future competition in one of the largest U.S. ride-hailing markets, raising concerns for established companies like Uber and Lyft.

Texas Democratic lawmakers have urged Tesla to delay its Austin robotaxi launch until new autonomous vehicle rules take effect in September, citing public safety and the need for regulatory clarity. Tesla has provided few details about the rollout, including passenger use and pricing, or how it will comply with upcoming regulations.

The U.S. Senate’s bipartisan approval of the GENIUS Act marks a significant step toward regulatory clarity for stablecoins, benefiting Circle, issuer of the USDC stablecoin. The legislation signals growing mainstream acceptance of stablecoins as an important part of the digital payments landscape, with major retailers reportedly exploring their own stablecoin initiatives.

AbbVie said its migraine drug Qulipta outperformed generic topiramate in a late-stage trial, showing lower discontinuation rates due to side effects and greater effectiveness in reducing migraine days. The study supports AbbVie's push into neuroscience as Humira faces biosimilar competition, with Qulipta meeting all trial goals.

Rio Tinto has agreed to pay $138.75 million to settle a class-action lawsuit accusing the company of misleading investors about delays and cost overruns in the $7 billion Oyu Tolgoi mine expansion in Mongolia. Denying wrongdoing, Rio Tinto and former CEO Jean-Sebastien Jacques settled to avoid litigation costs, with shareholder lawyers set to seek legal fees of around $18 million.

Pernod Ricard is restructuring by grouping its brands into two divisions, Gold and Crystal, to simplify the organisation and cut €1 billion in costs by 2029 amid declining sales and tariffs. The changes, including voluntary departures, are set for late 2025, reflecting challenges faced by European spirits makers like Diageo and LVMH amid a slowdown in key markets.

BofA Securities reaffirmed its buy rating on L’Oréal with a €420 price target, citing accelerating revenue growth in key markets and improving second-quarter momentum. Despite cautious sentiment, BofA sees valuation upside given the equity’s attractive P/E and strong margin outlook, projecting 2025 revenue of €44.6 billion and adjusted EBIT of €9 billion.

Oppenheimer reiterated its Outperform rating on Roblox and raised its price target to $125, citing strong user engagement, a growing content pipeline, and under-utilised monetisation features driving growth. Despite a 76% share rise since April, the firm remains optimistic about further upside, supported by improved recommendation algorithms and talks with top Roblox studios.

Needham cut its price target on Nike to $66 from $75, citing weakness in brand momentum, slowing demand for Jordans and Dunks, and margin pressures from tariffs and discounting. While maintaining a Buy rating and confidence in CEO Elliott Hill’s strategy, the analyst warned of continued short-term challenges including gross margin erosion and a tougher sales environment.

Upcoming data and events

With US markets closed today, the only relevant macro event is the Bank of England meeting.

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