European stock markets presented a somewhat mixed but generally positive picture at Tuesday’s open, with the pan-European Stoxx 600 index ticking higher.
London’s FTSE 100 notably outperformed, surging as trading resumed after a long Bank Holiday weekend, buoyed by a temporary reprieve in US-EU trade tensions.
However, concerns over rising UK food inflation and cautious German consumer spending tempered broader optimism.
Approximately 15 minutes into the trading day, the Stoxx Europe 600 index was trading 0.2% higher, indicating a modest overall advance.
However, performance across national bourses varied.
The UK’s FTSE 100 index of blue-chip shares jumped impressively, up 75 points, or 0.85%, to 8792 points, approaching a two-month high.
This relief rally in London was largely attributed to news that US President Donald Trump had delayed his threatened hike on EU tariffs to 50% until July, temporarily cooling fears of an escalating trade war.
Leading the FTSE 100 risers were engineering group Melrose (+3.8%), followed by technology firm DCC (+2.4%) and aerospace giant Rolls-Royce (+2%).
In contrast, mainland European markets showed more restraint.
France’s CAC 40 declined by 0.2%, while Germany’s DAX held steady, suggesting a more cautious investor stance on the continent.
Economic undercurrents
Despite the cheer in London’s equity market, fresh economic data highlighted ongoing inflationary pressures in the UK.
Food inflation rose by 2.8% year-on-year in May, according to the British Retail Consortium (BRC).
This marked the fourth consecutive month of price increases in this category, up from 2.6% year-on-year growth in April and exceeding the three-month average of 2.6%.
Helen Dickinson, Chief Executive of the BRC, stated on Tuesday that “fresh food prices were the main driver of the price rises, with wholesale beef prices increasing.”
She argued that increased costs being levied on businesses were having a clear inflationary impact.
“With retailers now absorbing the additional £5bn in costs from April’s increased Employer National Insurance contributions and National Living Wage, it is no surprise that inflation is rearing its head once again,” Dickinson said.
Meanwhile, in Germany, consumer sentiment showed signs of improvement in May, as per the GfK Consumer Climate report released on Tuesday.
This marked the third consecutive month of an upward trend for the index, partly driven by slowing inflation and “good wage settlements.”
However, despite this improvement, overall sentiment remained low, and analysts noted that consumers were hesitant to make discretionary purchases.
This reluctance was attributed to the ongoing threat of US tariff policies.
“The unpredictable customs and trade policy of the US government, turbulence on the stock markets and fears of a third consecutive year of stagnation are reasons why the consumer climate remains weak,” commented Rolf Bürkl, consumer expert at the NIM, in a statement on Tuesday.
In view of the general economic situation, people seem to think it advisable to save.
The GfK Consumer Climate report, which surveyed around 2,000 German consumers between May 1 and May 12, was jointly published by NIQ and the Nuremberg Institute for Market Decisions.
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