Europe close: Stocks manage gains as oil prices pull back

(Sharecast News) - European shares managed gains on Tuesday despite continued uncertainty over the US-Iran ceasefire, Israel's attacks on Lebanon, a heavy Russian bombardment of Ukraine and a fresh rise in eurozone inflation.

The pan-European Stoxx 600 rose 0.68% to 625.48.

Germany's DAX gained 0.46% to 25,116.86, France's CAC 40 added 0.77% to 8,209.09, and London's FTSE 100 advanced 0.33% to 10,373.51.

Brent crude futures were broadly flat, last down 0.02% on ICE at $94.96 a barrel, while the NYMEX quote for West Texas Intermediate fell 0.5% to $91.70.

Axel Rudolph, chief technical analyst at IG, said: "US equity indices ground higher while their European peers managed to hold on to slight gains amid reports that Iran paused its negotiations with the US while Israel pushed further into Lebanon.

"US consumer optimism remained stuck near multi-month lows while job openings surged to one-and-a-half-year highs and logistics were robust."

US president Donald Trump said Israel and the Iran-backed Hezbollah militia in Lebanon had agreed to stop fighting, despite both sides continuing to fire and Israeli prime minister Benjamin Netanyahu saying he would attack Beirut.

Peace talks with Iran also continued to drag on, with Tehran insisting that Lebanon be tied into any final agreement.

Brent held around $94 a barrel as the Strait of Hormuz remained closed to most traffic, after touching $95 on Monday when Iran suspended talks because of Israel's push further into Lebanon.

"The oil price retreated from Monday's spike high and was little changed on the day while precious metal prices advanced amid a slightly weaker US dollar," Rudolph said.

"Apart from monitoring the situation in the Middle East, investors will closely watch Friday's US non-farm payrolls report for fresh clues on the health of the labour market and broader economy, with the results likely to influence expectations for the Federal Reserve's next policy moves."

Russia added to the geopolitical pressure, launching 73 missiles and 656 drones at Ukraine, according to the Ukrainian air force.

The attacks hit major centres including Kyiv, Dnipro and Kharkiv, killing at least 11 people.

Euro area inflation rises in May

On the economic front, eurozone inflation rose to 3.2% in May from 3.0% in April, according to a flash estimate, adding pressure on the European Central Bank ahead of next week's rate decision.

Energy inflation reached 10.9%, while services prices rose 3.5% year-on-year.

Harry Woolman, global capital markets analyst at Validus Risk Management, said the inflation print "all but confirms a rate hike from the European Central Bank".

He said policymakers were increasingly focused on inflation pressures stemming from the Middle East, while weak PMI data had raised stagflation concerns as activity slipped into contraction.

Rudolph said eurozone inflation had accelerated to its highest level since September 2023, remaining well above the European Central Bank's target as "a sharp rise in energy prices, driven by Middle East supply disruptions, pushed overall price growth higher".

In the UK, mortgage approvals unexpectedly rose in April.

The Bank of England said net mortgage approvals for house purchases increased to 65,945, the highest since January 2025 and above expectations for a fall to around 61,700.

Net borrowing of mortgage debt fell to £4.4bn from £6.8bn, while the effective interest rate on newly drawn mortgages rose to 4.08% from 4.03%.

Paul Dales, chief UK economist at Capital Economics, told Reuters that buyers may have brought forward purchases ahead of further rises in borrowing costs.

He said mortgage approvals could therefore fall back soon, which would fit with other indicators showing that housing market sentiment has weakened since the war triggered higher mortgage rates.

Consumer credit borrowing was broadly unchanged at £1.9bn, while household deposits rose to £5.8bn from £5.6bn.

Patrick Munnelly, market strategy partner at TickMill, said fresh lending data had helped domestically focused shares.

"British lenders approved 65,945 mortgages for house purchases in April, the highest level in 15 months, up from 63,979 in March and comfortably above the 62,000 consensus forecast," he said.

"Net unsecured consumer lending rose by £1.859 billion, ahead of expectations for £1.7 billion, though slightly below March's £1.904bn increase."

Munnelly said the figures suggested household credit demand was more resilient than feared, despite weaker consumer sentiment and rising mortgage rates since the start of the Iran war in late February.

"Housebuilders responded positively, with the sector rising 1.5% during the session," he said.

Prosus in the green, Abivax slides

In equity markets, Prosus rose after the EU gave the Amsterdam-listed technology investor more time to reduce its stake in Delivery Hero as part of the approval process for its acquisition of Just Eat Takeaway.

The Financial Times reported that Prosus was considering using the waiver to temporarily increase its stake, either to block Uber's potential takeover or improve its bargaining position.

STMicroelectronics rallied after the semiconductor group raised revenue guidance for its data centres business.

On the downside, Abivax slumped after the French biotech company reported that several patients in its ulcerative colitis trial had developed cancer.

Analysts at Jefferies said the cancer cases "broke" its investment thesis and were likely to create an overhang for investor interest, strategic optionality and commercial uptake, even if they were ultimately found not to be drug-related.

Bayer also fell after plaintiffs sought to transfer a proposed $7.25bn US settlement over Roundup weedkiller to a federal court in California.

The German group said it intended to oppose the move from a Missouri state court.

Reporting by Josh White for Sharecast.com.