Europe close: Stocks mixed as oil prices surge again

(Sharecast News) - European shares closed mixed on Monday while oil prices surged after US president Donald Trump rejected Iran's latest peace proposals, reviving concerns that there would be no immediate end to the conflict in the Middle East.

The pan-European Stoxx 600 rose 0.11% to 612.83.

Germany's DAX edged up 0.07% to 24,355.41 and London's FTSE 100 gained 0.36% to 10,269.43, while France's CAC 40 fell 0.76% to 8,050.71.

Brent crude futures were last up 2.35% on ICE at $103.67 per barrel, and the NYMEX quote for West Texas Intermediate advanced 2.17% to $97.49.

Trump described Iran's counterproposal to end the war as "totally unacceptable".

Tehran was demanding an end to the war on all fronts, compensation for war damage, recognition of Iranian sovereignty over the Strait of Hormuz, an end to the US blockade and the lifting of sanctions on Iranian oil sales, according to Iran's semi-official Tasnim news agency.

The response followed Washington's peace proposals, which included Tehran giving up all nuclear ambitions.

Trump wrote on social media: "I have just read the response from Iran's so-called 'Representatives.' I don't like it - TOTALLY UNACCEPTABLE! Thank you for your attention to this matter."

The Strait of Hormuz had become too dangerous for shipping since war broke out at the end of February, while the US began its own blockade last month to halt Iranian exports.

A fragile ceasefire between Washington and Tehran was extended at the end of April, but the latest exchange renewed fears that supply constraints would persist.

Attention was now turning to Trump's visit to China this week, where the Middle East war and trade talks between the world's two largest economies are expected to dominate the agenda.

"Trump's dismissal of Iran's latest nuclear proposal has effectively reversed last week's peace deal optimism, sending Brent up," said Patrick Munnelly, market strategy partner at TickMill.

"With the Strait of Hormuz still constrained, the market is no longer pricing a clean de-escalation."

Chris Beauchamp, chief market analyst at IG, noted that Trump's rejection of Iran's demands set up the potential for another round of conflict in the region, but added that it seemed nothing was shaking investors from their conviction that a deal would be done "at some point".

"Oil prices have eased off the overnight highs, and while the Vix is higher, it remains within spitting distance of the recent lows - no one seems to have decided to panic just yet."

Chinese inflation hotter than expected

On the economic front, Chinese consumer and factory gate inflation came in hotter than expected in April, driven by the Iran war and holiday spending.

The consumer price index rose 1.2% year-on-year, up from 1% in March and ahead of expectations for 0.9%, helped by stronger travel spending around the Qingming and Labour Day holidays, as well as spring breaks in parts of the country.

Producer price inflation rose to 2.8% year-on-year from 0.5% in March, reaching a 45-month high and beating expectations.

Domestic energy prices rose 5.7%, adding 0.39 percentage points to the monthly CPI increase, amid volatility in global crude prices.

Core inflation, excluding food and energy, rose 1.2% year-on-year, compared with 1.1% in March.

Beauchamp said attention would turn next to US inflation figures due on Tuesday.

"Tuesday's inflation data provides the key event of the week, but after Friday's better jobs report even acceleration in price growth might not be able to dislodge the rally in US markets.

"So long as a recession is still off the cards, markets are content, and what's a little bit of higher inflation when earnings continue to be so strong?"

Delivery Hero jumps, defence stocks in the red

In equity markets, Delivery Hero jumped 17.81% after Prosus agreed to sell part of its stake in the food delivery platform to Aspex Management for around €335m.

Defence stocks retreated after last week's Middle East peace hopes appeared to stall.

Rheinmetall fell 2.91%, Renk Group dropped 5.76%, Leonardo lost 3.48%, Hensoldt declined 3.3% and Babcock International slipped 2.03%.

GEA Group fell 4.3% after reporting flat first-quarter earnings.

Reporting by Josh White for Sharecast.com.