European equities pause after strong rally

Germany’s DAX declined 0.4%, while France’s CAC 40, Italy’s FTSE MIB and Spain’s IBEX 35 were flat

European equities entered a holding pattern on Wednesday, pausing after a strong four-session rally as investors digest details of the Iran-U.S. peace deal and shift focus to an upcoming Eurozone inflation data.

The pan-European STOXX 600 index opened largely unchanged, just below its record highs, after collectively adding around 3% in the past four sessions.

Germany’s DAX declined 0.4%, while France’s CAC 40, Italy’s FTSE MIB and Spain’s IBEX 35 were flat.

Concurrently, Swedish equities bucked the broader cautious trend to trade 0.1% lower, as investors positioned themselves ahead of an anticipated interest rate hold by the Riksbank.

Interest-rate-sensitive real estate heavyweights like Segro and Aroundtown stayed flat. The subdued price action come as investors lock in gains ahead of a dual-pronged monetary test.

Crude extended their sell-off following reports that Washington will formally waive its sanctions on Iranian crude. This development effectively extracted the “geopolitical risk premium” from energy prices, allowing investors to unwind bets on an extended inflationary shock.

This deflationary relief was immediately visible in fixed income, with short-dated Eurozone bond yields, which move in lockstep with ECB monetary policy expectations, continued their descent.

However, the commodity slump left London’s FTSE 100 firmly on the defensive. Heavily weighted by index titans BP and Shell, the UK benchmark largely sat out the broader European relief rally.

Markets also digested the latest domestic inflation numbers which came in at 2.8% – unchanged on an annual basis, which will now feed into the Bank of England’s rate decision on Thursday.

Among individual stock moves, Medicell dropped 10% after reporting full year results.