The TPP midweek update, by Lane Clark of TPP.

United Kingdom

London proved relatively resilient. Having ended Tuesday a touch firmer, the FTSE 100 closed Wednesday around 0.4% lower at 10,332.3 as a sharp overnight escalation in the Middle East soured the global mood. Crucially, the index held up far better than its Continental peers: with oil climbing back toward $97 a barrel, the heavyweight energy names BP and Shell drew support, and the miners that dominate the benchmark helped cushion the wider risk-off tone.

The domestic backdrop is little changed — the British Retail Consortium’s hotter-than-expected shop price inflation, alongside underlying CPI in the high-2% range, keeps the Bank of England finely balanced — but for now it is geopolitics and the oil price, rather than data, steering the tape. Sterling held a little below 1.35 against the dollar.

Europe

Continental bourses bore the brunt of the risk-off move. After Tuesday’s confident rebound, the major indices fell on Wednesday as fresh exchanges between the United States and Iran overnight — including missile attacks on Kuwait and Bahrain and renewed US strikes near the Strait of Hormuz — drove oil higher and sapped appetite for risk.

The pan-European STOXX 600 closed down around 0.5% at 621.96, with Germany’s DAX the weakest of the majors, sliding 1.2% to 24,811.63, and France’s CAC 40 off 0.7% at 8,150.42. Carmakers were the hardest-hit sector and airlines fell on higher fuel costs, though Valeo bucked the trend, leaping more than 18% after upbeat guidance at an industry conference. As a heavy importer of energy, the region remains acutely exposed to the renewed climb in crude.

United States

Wall Street was trading lower on Wednesday afternoon, slipping from the record highs set only a day earlier. In early-afternoon dealings the S&P 500 was down around 0.4%, the Dow off 0.5% and the Nasdaq some 0.6% lower, while the small-cap Russell 2000 fell 1.3%. With the VIX up more than 4% above 16, even the AI and semiconductor names that had powered the recent rally offered little shelter. The catalyst was the same geopolitical flare-up unsettling other markets, with Brent crude back near $97 a barrel.

On the data front, the ADP report showed private payrolls rose by 122,000 in May, ahead of the 117,000 expected and a reminder of labour-market resilience just two days before Friday’s all-important non-farm payrolls. Corporate headlines stayed busy too, with Alphabet’s record $80 billion equity offering still in focus and reports of a landmark SpaceX listing in the pipeline.

Asia

Asian markets had closed before the worst of the risk-off mood took hold, and Tokyo stole the show once again. The Nikkei 225 surged 2.5% to a record close of 68,402, powered by the global semiconductor rally, with chip-equipment names Tokyo Electron and Advantest among the standouts; the yen slipped beyond 160 to the dollar.

The picture was more mixed elsewhere. Hong Kong’s Hang Seng fell 1.56% to 25,633, while mainland China edged higher, the Shanghai Composite adding 0.22% to 4,084.

Attention now turns to the Bank of Japan, with markets pricing roughly a 78% probability of a further rate rise later this month as Middle East-linked inflation pressures build.

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