European stocks are anticipated to open on a sluggish note on Wednesday as investors remain concerned about the outlook for interest rates and closely monitor the latest developments in the Middle East.
Traders have further reduced their expectations for a rate cut by the U.S. Federal Reserve, following comments from Minneapolis Fed President Neel Kashkari. Kashkari indicated that he needs to see "many more months of positive inflation data" before considering an interest rate reduction.
In the Middle East, tensions have escalated with reports that Iranian-backed Houthi rebels fired five anti-ship ballistic missiles from Yemen into the Red Sea, raising concerns about maritime safety.
In Asia, stocks mostly declined, although Chinese markets saw a slight uptick following moves by local governments to support the property sector.
The U.S. dollar and Treasury yields remained firm as investors awaited key inflation data expected later this week, which could provide direction.
On Friday, the U.S. Commerce Department is scheduled to release its report on personal income and spending for April, which includes the Federal Reserve's preferred inflation measures. This data could significantly impact the outlook for interest rates ahead of the Fed's next monetary policy meeting on June 11-12.
The U.S. economic calendar is relatively quiet today, though the Fed's Beige Book may attract some attention.
In Europe, preliminary CPI data from Germany and consumer confidence figures from Germany, France, and Italy could influence trading sentiment later in the day.
Gold traded lower, while oil extended overnight gains ahead of an OPEC+ meeting.
In the U.S., stocks ended mixed overnight. Nvidia shares surged, helping the tech-heavy Nasdaq Composite rise 0.6 percent to a new record closing high, while the S&P 500 finished slightly higher. The Dow Jones Industrial Average, however, fell 0.6 percent following hawkish comments from Neel Kashkari and a rise in the 10-year Treasury yield above 4.5 percent after relatively weak 2-year and 5-year Treasury auctions.
Economic data showed an unexpected improvement in U.S. consumer confidence in May, after three consecutive months of decline.
European stocks closed lower on Tuesday as investors reevaluated the likely stances of the Federal Reserve, the European Central Bank (ECB), and the Bank of England (BOE) regarding interest rates. The pan-European STOXX 600 fell 0.6 percent, Germany's DAX dipped 0.5 percent, France's CAC 40 shed 0.9 percent, and the U.K.'s FTSE 100 declined 0.8 percent.
