EBC Markets Briefing | ​European stocks rebound as Iran may compromise

The Stoxx 50 rallied by nearly 1% on Monday on cooling risk-off mood. The EU and the US have been locked in technical and political talks to resolve their ongoing trade conflict.

Wall Street Journal reported Iran is now seeking a truce. Israeli PM Netanyahu insisted that Israel was committed to eliminating threats posed by Iran's nuclear and ballistic missile programmes.

Trump said on Monday he will soon be back in Washington from the G7 summit held in Canada for the issue. He said the assault could end quickly if Iran agreed to US demands.

The impact of a conflict between Israel and Iran may be underestimated, market watchers warned on Monday, as stocks rallied despite escalating warfare in the Middle East.

But strategists BNPP believe the market is correct in not pricing a huge escalation. Deutsche Bank said the rivalling countries had so far avoided "the most extreme escalatory steps" while trading blows.

Flare-up in the Middle East is boosting energy costs, which helps thwart efforts to curb inflation. It may also distract the White House from ongoing trade talks with major trader partners.

The Stoxx 50 seems well supported by 5,440, but the latest rise stalled near the 50 EMA. As such we see slight downside bias, and consolidation could stay for a while.

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