Europe close: Stocks manage gains on hope for US-Iran peace proposal

(Sharecast News) - European stocks closed higher on Monday as Iran said it had responded to a US peace proposal, easing some tensions after president Donald Trump again threatened to resume bombing if Tehran did not sign a deal.

The pan-European Stoxx 600 rose 0.34% to 608.99.

Germany's DAX gained 1.24% to 24,247.58, France's CAC 40 added 0.44% to 7,987.49, and London's FTSE 100 advanced 1.26% to 10,323.75.

In commodities, Brent crude futures were last up 1.49% on ICE at $110.89 per barrel, while the NYMEX quote for West Texas Intermediate gained 1.29% to $106.78.

Chris Beauchamp, chief market analyst at IG, said stock markets had "swerved a sell off yet again thanks to some positive noises in US-Iran talks".

"It has been another of those odd 'stocks up, oil up' days that have become such a feature of the global financial markets since the beginning of March," he said.

"After looking decidedly weak this morning, rescue arrived in the form of signs that the US and Iran were once again talking, and that, even more importantly, a small unthawing of relations was underway.

"For two such implacable foes, the signs that they are capable of making concessions in pursuit of a deal is just what markets need to see, and investors grabbed the opportunity with both hands."

Trump warned Iran in a social media post on Sunday that "the clock is ticking", adding that Tehran "better get moving, fast, or there won't be anything left of them".

An Iranian foreign ministry spokesperson later said: "As we announced yesterday, our concerns were conveyed to the American side."

Reuters reported that a revised Iranian peace plan had been shared with Washington via Islamabad, with Pakistan acting as intermediary.

Iranian media said the proposal contained 14 points, although no official details were published.

Pakistan's interior minister Syed Mohsin Naqvi arrived in Tehran on Saturday for a two-day visit that was reportedly extended by 24 hours.

Tensions remained elevated, however, after the New York Times reported that the US and Israel were preparing to resume joint attacks on Iran as soon as this week.

The United Arab Emirates also blamed a fire near its Barakah nuclear power plant on a drone launched by Iran or one of its proxies, calling it a "dangerous escalation".

The regulator said there was no radioactive leak or risk to the public.

The G7 was also meeting in Paris, where US Treasury secretary Scott Bessent said he would call on finance ministers to impose sanctions on Iran to keep funds away from its "war machine".

But Iran's semi-official Tasnim news agency, citing an unnamed source close to the negotiating team, reported that the US had agreed to temporarily waive sanctions on Iranian oil while talks continued.

Beauchamp said the oil market's reaction showed that optimism remained fragile.

"Oil markets did dip on the news of peace talk progress, but it was short-lived.

"Reports that Israel and the US are prepared to restart operations limited the downside, and even the limited progress in negotiations comes up against the salient fact that Hormuz remains firmly shut.

"Oil markets seem just as content to rally as equities, just on a very different, and perhaps more concrete, set of drivers."

UK house prices rise as consumer sentiment slips

On the economic front, UK house prices rose in May as confidence in the market remained "surprisingly strong", according to Rightmove.

Average new seller asking prices increased 1.2% month-on-month to £378,304, after a 0.8% rise in April, beating the typical 10-year May increase of 1%.

Prices were down 0.3% year-on-year, an improvement from April's 0.9% decline.

Colleen Babcock, property expert at Rightmove, said activity was staying steady despite cost-of-living pressures and global uncertainty.

"What's notable this month is that activity in the market is staying fairly steady, even with ongoing cost-of-living pressures and wider global uncertainty," she said.

Matt Smith, Rightmove's mortgage expert, said small falls in mortgage rates and greater lending flexibility were helping buyers, particularly first-time buyers, make the numbers work.

UK consumer confidence meanwhile fell to its lowest level since July 2023 as households became more worried about prices and interest rates.

The S&P Global UK consumer sentiment index slipped to 42.1 in May from 42.3 in April, its third straight fall.

The survey showed 51% of households expected interest rates to rise, compared with 14% expecting a Bank of England cut.

Maryam Baluch, economist at S&P Global Market Intelligence, said households had become increasingly gloomy as the war in the Middle East showed no sign of ending.

"Outside of the pandemic and Ukraine-related energy price spike, we have not seen households this downbeat since 2012," she said.

"Inflation worries have firmly taken centre stage."

Danni Hewson, head of financial analysis at AJ Bell, noted that the UK's growth forecast was upgraded by the IMF after GDP grew more than expected in the first three months of the year, which was "welcome news" against the backdrop of continued economic uncertainty.

"There's a lot to be said for resilience, but recent momentum could fizzle out as quickly as a can of pop left out in the sun if waning confidence pushes consumers and businesses to press pause on any renewed spending plans."

She added that households were increasingly focused on the impact of higher fuel costs.

"Anyone that's filled up their vehicle in the past few weeks will be acutely aware of the impact the Iran war and continued logjam in the Strait of Hormuz are having on the price at the pump.

"People are increasingly nervous about their household budgets and the strain that another brush with high inflation could have on their standard of living," Hewson said.

"But official data due out this week is expected to show a fall in the headline rate for April, with CPI likely to have dropped back to around 3% after edging up in March."

Elsewhere, China's economy weakened in April, with retail sales and industrial production both missing forecasts.

Retail sales rose just 0.2%, slowing from 1.7% in March and well below expectations for 2% growth, as car sales fell 15.3% and household appliances dropped 15.1%.

Industrial production grew 4.1%, down from 5.7% and below forecasts for 5.9%, while fixed asset investment unexpectedly fell 1.6%.

Ryanair reverses losses, Publicis jumps on LiveRamp deal

In equity markets, Ryanair rose 4.86%, reversing earlier losses after the airline pulled profit guidance for the current financial year because of material uncertainty linked to higher jet fuel prices and other rising costs.

It also said summer fares were likely to fall year-on-year.

Publicis Groupe gained 6.02% after the French advertising company agreed to buy US data platform LiveRamp for a total enterprise value of $2.2bn.

Reporting by Josh White for Sharecast.com.