European stock markets opened mostly higher on Tuesday, with the STOXX 600 index gaining 0.2% and the FTSE 100 rising 0.8%. However, France’s CAC 40 declined by 0.2%, while Germany’s DAX held steady. Yields on government bonds moved lower across Europe, as investors continued to digest recent statements from U.S. President Donald Trump.
The yield on German bunds, seen as a benchmark for the eurozone, fell by 4 basis points. U.K. gilts also saw significant movements, with yields on long-dated 20- and 30-year gilts edging 7 basis points lower. Deutsche Bank’s Jim Reid noted that markets were becoming “more accustomed to Trump’s threats and now partly assume the full threat won’t immediately materialize.”
French inflation cooled to 0.6% in May, according to provisional data from Insee.
The slowdown was attributed to a decline in the price of services and contracting energy costs, while food prices continued to rise. German consumer sentiment improved in May, as shown by the GfK Consumer Climate report.
European markets show cautious optimism
However, despite the improvement, sentiment remained low, and consumers were hesitant to make discretionary purchases due to the unpredictable trade policies of the U.S. government, turbulence on the stock markets, and fears of a third consecutive year of stagnation. The British Retail Consortium’s inflation data suggested that some U.K. retailers might be strategically lowering prices to get ahead of looming U.S. tariffs. Non-food prices remained in deflation, slowing in categories such as fashion and furniture.
Food inflation in the U.K. rose by 2.8% year-on-year in May, marking the fourth consecutive month of price rises. Fresh food prices were the main drivers of the increase, particularly wholesale beef prices. In early European trading, Eurostoxx futures surged by 1.5%, signaling a potential rebound from last Friday’s decline.
German DAX futures were also up by 1.4%, indicating broad optimism in the European markets. The gains in futures markets suggest renewed investor confidence as negotiations continue between the U.S. and the EU, which could defuse potential trade tensions.
