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[MARKET ANALYSIS] European bourses entirely in the red, UK Banks hit on political turmoil; US equity futures pull back from ATHs

European equities are experiencing widespread losses due to a mix of geopolitical tensions, specifically the escalating Iran-US conflict and significant UK political turmoil, which is adversely impacting consumer confidence and the banking sector.

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  • European bourses (STOXX 600 -0.8%) trade with losses across the board, driven by multiple factors: 1) Iran-US war seemingly not having an end in sight, 2) UK political turmoil, and 3) mixed earnings. Overnight, US President Trump said that the ceasefire is unbelievably weak and reiterated that Iran’s proposal is unacceptable. Further reporting by Axios stated that Trump held a meeting with his national security team to discuss a way forward, which included the possible resumption of military action. This drove energy prices higher and, in turn, weighed on equities globally.
  • The FTSE 100 is the second-best performing index, behind the SMI, despite the political turmoil. Ahead of the Cabinet meeting, PM Starmer’s Aide Jones indicated that the PM could be about to announce a timetable for his resignation. This came following a Politico report in which as many as 6 ministers could ask for the PM to outline his exit plans at the meeting. As of now, over 81 Labour MPs have called for Starmer to resign, which is officially enough to launch a leadership challenge. UK Banks (Lloyds -3.5%, Barclays -3.9%, NatWest -4.2%) have been hit the hardest, as the political situation affects UK consumer confidence and hence limits spending and borrowing.
  • European sectors are broadly in the red, with Energy outperforming as WTI and Brent regain the USD 100/bbl and USD 106/bbl respectively. Outside of Banks, Retail sits at the bottom of the pile.
  • Key movers include Intertek (+6.0%), as EQT increased its offer to GBP 61.077/shr (prev. GBP 58/shr); Munich Re (-4.4%), after its Q1 EPS and Insurance Revenue metric missed estimates; LVMH (+0.9%), with the Co. upgraded to Overweight from Equal Weight at Barclays.
  • US equity futures are under pressure, pulling back from the ATHs made in Monday’s session.
Context

This environment has led to a pullback in US equity futures from all-time highs, indicating a cautious sentiment in global markets that could persist if these issues remain unresolved.

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