European shares tepid as markets weigh US-Iran deadlock

EUROPEAN shares were muted on Monday, as stalled US-Iran peace negotiations pushed oil prices higher and weighed on risk appetite.

The pan-European Stoxx 600 was flat at 611.68 points, as of 0805 GMT. Regional bourses moved in different directions, with London’s FTSE 100 edging 0.2 per cent higher, while France’s CAC 40 slipped 0.7 per cent.

US President Donald Trump rejected Iran’s response to a peace proposal by Washington, calling it “totally unacceptable.” Tehran proposed ending the war on all fronts, including Lebanon, along with compensation for war damage and claimed sovereignty over the Strait of Hormuz, Iranian state TV said.

“While the re-escalation in hostilities interrupted recent optimism over a potential deal that could reopen the Strait, we still believe an eventual diplomatic solution should emerge,” said Mark Haefele, chief investment officer, UBS Global Wealth Management.

“A resilient economic backdrop and robust earnings growth mean that investors should stay positioned for long-term equity gains through diversified exposure.”

The war has shuttered the Strait of Hormuz, a vital waterway for a fifth of global oil and liquefied natural gas flows, with soaring oil prices adding to concerns over the conflict’s impact on inflation and growth.

Energy-dependent Europe remains vulnerable, with markets still trading about 4% below pre-war levels and lagging global peers that have rebounded on artificial intelligence-driven optimism.

Defence shares fell the most, down 2.1 per cent. Germany’s Rheinmetall and Hensoldt dropped 9.2 per cent and 5.6 per cent, respectively. Shares of UK’s Rolls-Royce, Bae Systems and Babcock shed between 3 per cent and 4.3 per cent.

Luxury stocks in the region shed 1.6 per cent, with Burberry and LVMH slipping more than 1 per cent each, while Hermes lost 2.4 per cent.

SEE ALSO

China stocks hit 11-year high on AI optimism, exports rebound

South Korea’s chip surge hides the market’s vulnerabilities

South Korean shares hit all-time high as ‘ants’ join global rush to buy AI stocks

The telecommunications index moved higher. BT gained 6.5 per cent, while Vodafone rose 2.3 per cent.

Martin Kocher, a governing council member of the European Central Bank, warned that the ECB would need to adjust interest rates soon if the inflationary outlook did not significantly improve.

Money markets expect two or more rate hikes from the ECB this year, with the first one expected as early as June.

Among other movers, Delivery Hero advanced 8.2 per cent after Dutch technology investor Prosus sold a 5 per cent stake in the German food-delivery group to activist investor Aspex Management for roughly 335 million euros (S$499 million).

UK’s Compass Group gained 1.7 per cent after the world’s largest caterer raised its full-year profit outlook. REUTERS