European equities end flat as investors await Middle East peace updates

[BENGALURU] European shares ended flat on Thursday (May 21), pausing after strong gains in the previous session as investors awaited progress on US-Iran peace negotiations.

The pan-European Stoxx 600 was little changed at 620.56 points, a two-week high.

Latest developments in the Middle East suggested a hardening of US and Iranian stances, sending crude prices up over 2 per cent.

US Secretary of State Marco Rubio said that a tolling system in the Strait of Hormuz would make a diplomatic deal unfeasible, while Reuters reported that Iran’s supreme leader issued a directive that the country’s near-weapons-grade uranium should not be sent abroad. Fresh data also showed that the conflict was taking its toll on European businesses.

France’s private sector economy contracted in May at its fastest pace in over five years, while another survey showed Germany’s private sector contracted for a second month.

“The eurozone economy faces a greater risk of stagflation from any policy tightening, with business activity shrinking for a second straight month in May,” said Raffi Boyadjian, lead market analyst at brokerage XM.

Sources told Reuters that the case for a European Central Bank (ECB) rate hike in June was nearly sealed, but the bank is likely to be noncommittal about a further move.

Money markets currently price in more than two rate hikes from the ECB before year-end.

Despite a recovery from lows hit during the conflict, European equities have struggled to bounce back to pre-war levels, held back by the region’s dependence on oil imports and small tech exposure amid an artificial intelligence-led global rally in shares.

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European equities ease as investors await Middle East peace updates

Global tech bellwether Nvidia announced strong forecasts late on Wednesday, reflecting strong demand for AI infrastructure. European tech stocks were mixed, with ASML up 1 per cent while STMicroelectronics was marginally lower.

Enthusiasm over Elon Musk’s SpaceX public market debut crept into European markets. French satellite operator Eutelsat shot up 22 per cent, while German satellite maker OHB gained 7.7 per cent and Luxembourg-based SES added 3.7 per cent.

Travel and Leisure stocks led declines with a 1.4 per cent drop. EasyJet posted a first-half lossin line with expectations, and said its full-year outlook remains uncertain amid the Iran war. The British budget airline was up 0.9 per cent.

Italy’s top insurer Generali gained 2.7 per cent after first-quarter results beat expectations and maintained its 2027 targets.

QinetiQ jumped 7.9 per cent after the defence group announced a £200 million (S$343 million) share buyback and forecast 3 to 5 per cent revenue growth for 2027.

Autotrader fell almost 9 per cent after the British automotive marketplace reported flat revenue in April as customer numbers dropped. REUTERS