On the geopolitical front, the US military shot down an Iranian drone on Tuesday that approached the aircraft carrier Abraham Lincoln "aggressively," in the midst of attempts to organize nuclear talks between the two countries. President Donald Trump warned that "bad things" could happen if no agreement was reached, as US warships headed toward the Islamic republic.
Sentiment was already shaken by a scare in the previous Wall Street session—which later moderated—in data analytics, professional services, and software companies, after Anthropic launched a legal sector tool that reignited fears that AI advances could displace traditional software.
On the monetary policy front, markets continue to digest President Donald Trump's nomination of Warsh, amid expectations he will not favor rapid rate cuts. Still, investors found some relief as doubts over the Fed's independence eased after Trump's attacks on the central bank and its current chair, Jerome Powell.
The corrective move was tempered by positive news out of Washington, where Trump signed a spending deal that ended a partial government shutdown after four days, although key employment data scheduled for Friday will be delayed due to the stoppage.
In the Spanish market, Santander weighed on the index, dropping 4.5% after announcing its purchase of US regional Webster Financial for $12.2 billion to create one of the country's top ten retail and commercial banks. The group also reported a 12% rise in its 2025 net profit to a record €14.1 billion, above forecasts of €13.77 billion.
Looking ahead to the newly started session, attention will focus on the eurozone's preliminary CPI and Alphabet's earnings results.
The preliminary eurozone inflation figure for January, due Wednesday, will set the tone ahead of Thursday's European Central Bank decision, with the euro's strength under scrutiny. Analysts on average expect a year-on-year increase of 1.7%, down from December's 1.9%.
Across the Atlantic, after Wall Street closes, Alphabet will report its quarterly results, with expectations for a 15.5% jump in revenue to $111.37 billion.
Bankinter analysts highlight that "the market is ruthless in [its] reception [of corporate earnings reports]. If the guidance (rather than the numbers) convinces, the reward is immediate, but any misstep is punished mercilessly."
"The key will once again be in the guidance and the ability to monetize heavy AI investments," they add, referring to the results from Qualcomm and, above all, Alphabet.
At 08:05 GMT on Wednesday, Spain's blue-chip IBEX 35 index was down 109.90 points, or 0.61%, at 18,009.30, while the pan-European FTSE Eurofirst 300 index slipped 0.24%.
In the banking sector, BBVA slipped 0.09%, Caixabank gained 0.04%, Sabadell fell 0.53%, Bankinter rose 0.10%, and Unicaja Banco dropped 0.42%.
Among major non-financial stocks, Telefónica added 0.75%, Inditex climbed 0.84%, Iberdrola rose 0.24%, Cellnex gained 0.92%, and oil company Repsol advanced 1.10%.
(Reporting by Tomás Cobos, editing by Jorge Ollero Castela)
