DAX, CAC 40, IBEX, and Stoxx 50 in focus ahead of the ECB interest rate decision

European stock index futures were relatively mixed today, June 11, as investors watched the developments in the Middle East and the impact on the energy market. They also wavered ahead of the European Central Bank (ECB) interest rate decision.

Futures tied to the German DAX dropped by 80 points to €24,160. It has retreated by nearly 6% from its highest point this year. On the other hand, futures linked to the CAC 40 and Euro Stoxx rose slightly, mirroring the performance of their American counterparts. After dropping sharply on Wednesday, the Dow Jones, S&P 500, and Nasdaq 100 futures rose by over 0.35%. 

DAX, CAC 40, and IBEX indices | Source: TradingView

European Central Bank interest rate decision

European stock indices like the DAX, CAC 40, IBEX 35, and FTSE MIB will be in the spotlight today as the European Central Bank (ECB) delivers its interest rate decision.

Economists polled by Reuters expect the central bank to hike interest rates by 0.25% to combat the elevated inflation. The most recent data showed that the headline consumer inflation rate rose 3.2% in May from 3% in the previous month. It has been in an uptrend after bottoming at 1.7% in January.

Core inflation, which excludes the volatile food and energy prices, rose 2.5% in May from 2.2% in April. This figure, which excludes the volatile food and energy prices, has been in an uptrend in the past few months. 

Therefore, the bank is now expected to hike interest rates by 0.25%, with Polymarket traders expected to maintain a more hawkish tone this year.

This situation is a major setback to the bank, which was in a dovish tone before the war started. It slashed rates from 4.5% in 2024 to the current 2.15%.

These expectations explain why European bond yields have jumped in the past few weeks. In Germany, the ten-year yield jumped to 3.076% and is hovering near its highest point since 2011.

In France, the ten-year has soared to 3.732%, its highest point since 2009. Similarly, in Spain and Italy, the yield jumped to 3.53% and 3.86%, respectively. All these numbers have jumped sharply from their lowest level this year.

In most cases, stocks tend to underperform whenever interest rates are in an uptrend. For one, higher rates normally boost their borrowing costs. 

The US-Iran crisis is escalating

European indices are also wavering amid the ongoing US-Iran crisis, which escalated overnight. The US launched strikes against Iran overnight, pushing Iran to respond. 

As a result, energy prices held relatively steady, with Brent and the West Texas Intermediate (WTI) rising to $94 and $90, respectively. 

According to Axios, President Donald Trump is considering a more sustained attack in a bid to pressure Iran to a deal. Such a move will push Iran to respond hard, a move that will push oil prices higher. 

For example, Iran has hinted that it may close the Red Sea, where 12% of all crude oil passes through. Therefore, these concerns will likely escalate and hurt European indices.