European stocks muted as investors gauge US interest rate outlook
FRANKFURT: European stocks seesawed throughout Thursday before closing largely flat, as investors weighed the latest signals on the US interest rate trajectory.
The pan-European STOXX 600 index closed up 0.09% at 537.48 points. Other regional indexes also followed suit with similar moves, with only Germany's DAX up 0.6%.
Federal Reserve Chair Jerome Powell suggested in his congressional testimony this week that if not for inflationary pressures tied to the Trump administration's tariffs, the central bank might have kept cutting rates.
US President Donald Trump stepped up his criticism of Powell and hinted at a shortlist of potential replacements, while the Wall Street Journal reported that a shake-up could come as early as September.
Markets are now focused on the July 9 US tariff pause deadline. With trade talks largely stalled — apart from a US-UK agreement — the European Union is trying to clinch its own deal with Washington. EU leaders, meeting on Thursday, must decide whether to opt for a quick accord, or dig in for a tougher fight.
'We haven't heard much about a deal between US and Europe and as we approach closer to the tariff deadline, it's becoming more of a risk factor for Europe,' said Anthi Tsouvali, multi-asset strategist at UBS Global Wealth Management.
Against this backdrop, the STOXX 600 was on track for its first weekly gain in three weeks, buoyed by optimism that the fragile truce between Iran and Israel will hold.
Among sectors, European defence rose 3.1%. NATO leaders on Wednesday backed the big increase in defence spending that Trump had demanded.
Industrial miners led sectoral gains, jumping nearly 4% - logging their biggest intraday percentage gain in over a month, buoyed by copper prices that were near three-month highs.
Rheinmetall and Airbus jumped 7.3% and 2.7%, respectively. Saab rose 6.3%, while QinetiQ was up 7.3%.
Conversely, consumer-focused stocks were the biggest drag on the index, with the luxury sector and personal and household goods dropping more than 1.4% each.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Recorder
6 hours ago
- Business Recorder
Public aggression, private restraint
EDITORIAL: Good thing this isn't turning out to be another one of president Trump's tricks. For once, the president's abrupt pivot from war to diplomacy appears to have held — and the Iran-Israel ceasefire, fragile though it may be, has held with it. That's saying something, given how recently he admitted to using negotiations as a ruse to lull Iranian leadership while Israel launched the opening salvos. Then, while dangling a two-week window for talks, he struck again. And just a day before announcing the ceasefire, he was still entertaining talk of regime change in Tehran. It didn't help that both Israel and Iran absorbed far more damage in this brief but blistering episode than they had anticipated. Israel, in particular, was caught off guard by the scale and precision of Iranian strikes. Entire neighbourhoods in Tel Aviv and Haifa were gutted, shattering the long-held illusion that Iran would never retaliate directly or decisively. Iran's ability to sustain such an attack — even under the weight of sanctions and international isolation — shocked not just Israeli planners, but its American backers. And yet the first reliable indicator that something had changed did not come from official channels — it came from the markets. As Iranian missiles were still in the air, oil prices dropped and equities rallied. That told the real story. The strikes were not interpreted as escalation. They were decoded as de-escalation — symbolic retaliation with political cover and strategic signalling, not a trigger for all-out war. Markets, unlike political speechwriters, have no time for theatrics. They responded to what was, not what was said. There's also mounting evidence that the Americans and Iranians coordinated just enough to allow each other a way out. Personnel and key assets were quietly moved out of harm's way before attacks. Trump even publicly thanked Iran for what he called their 'professionalism' in avoiding casualties. It's also being reported that the US gave Tehran advance notice before targeting their airbases — giving both sides political ammunition for domestic audiences, while reducing the actual cost of confrontation. This manufactured choreography — public aggression, private restraint — is telling. It allowed Iran to claim it struck back without inviting a second wave. It gave Israel the opportunity to insist it had delivered deterrence. And it gave Trump the spotlight to play the peacemaker. But if the intent was to defuse tensions, it would have helped if the ceasefire hadn't come less than 24 hours after open talk of regime change. That inconsistency is now the biggest source of instability. No one knows if Trump is negotiating in good faith or simply buying time. If this pattern holds — provoke, pause, provoke again — then the region will remain locked in a cycle of symbolic restraint followed by unpredictable violence. And that will do little to prevent the next miscalculation. In the meantime, diplomacy has been reduced to theatre, and restraint outsourced to financial markets. The real risk is that, next time, the choreography may fail. Trump's current narrative only works if all parties stick to the script. But war, unlike politics, doesn't always respect timing or intention. Already he's fuming and swearing at both parties — more Israel than Iran — for violating the truce. For now, the ceasefire holds. But so does the memory of how it began. And unless Trump proves capable of consistency — something he has shown no talent for — the next strike may not come with the courtesy of advance notice or a convenient off-ramp. That's what should worry everyone. Copyright Business Recorder, 2025
Business Recorder
6 hours ago
- Business Recorder
Gold slips on easing ME tensions, Fed rate cut uncertainty
NEW YORK: Gold prices edged lower on Thursday, weighed down by easing geopolitical tensions in the Middle East and continued uncertainty over the Federal Reserve's interest rate trajectory. Spot gold fell 0.5% to $3,316.47 per ounce, as of 0933 a.m. EDT (1333 GMT). US gold futures slipped 0.4% to $3,329.20. 'Gold has declined over the past few sessions due to de-escalation in the Middle East. Also, adding pressure was the anticipated interest rate cut — eagerly awaited by the market that continues to be delayed amid rising inflation expectations driven by Trump-era tariffs,' said David Meger, director of metals trading at High Ridge Futures. Meanwhile, Fed Bank of Richmond President Thomas Barkin cautioned it was hard to know how tariff increases will translate into inflation in the US economy. Chicago Fed president Austan Goolsbee said a decision by US President Donald Trump to name a replacement for Fed chair Jerome Powell would have no influence on monetary policy from outside the central bank. Markets currently anticipate two rate cuts totalling 50 basis points this year, starting in September. Gold usually does well during times of uncertainty and inflation, but higher interest rates make it less attractive since it doesn't earn any interest. Data showed the US economy contracted a bit faster than previously thought in the first quarter amid tepid consumer spending, underscoring the distortions caused tariffs. Investors are now eyeing Friday's Personal Consumption Expenditures (PCE) data. Palladium lost 2.5% to $1,084.41. Platinum climbed to its highest level since September 2014, adding 1.7% to $1,377.62. Internal combustion vehicles are likely to remain relevant for longer as governments delay phase-out targets, and biofuel adoption continues to rely on platinum group metals, said Nitesh Shah, commodities strategist at WisdomTree. Spot silver was up 0.2% to $36.39.
Business Recorder
6 hours ago
- Business Recorder
Dollar down against euro, sterling
NEW YORK: The dollar hit a three-and-a-half-year low against the euro and sterling on Thursday in a broad selloff as traders priced in the likelihood that the Federal Reserve will cut rates more than previously expected. 'This week it's definitely been about the Fed, the prospect of easing sooner and potentially more rate cuts,' said Eric Theoret, FX strategist at Scotiabank in Toronto. Fed Chair Jerome Powell was interpreted as being more dovish this week in testimony to US Congress, saying that, if it were not for expectations for higher inflation as a result of the Trump administration's tariffs, the US central bank would have likely continued to cut interest rates. He nonetheless maintained that the Fed should stand pat as it anticipates an increase in price pressures this summer. US President Donald Trump will nominate a new Fed Chair next year who is expected to be more dovish than Powell, whose term will end in May. Trump on Wednesday called Powell 'terrible' and said he has three or four people in mind as contenders for the top Fed job. The Wall Street Journal reported on Wednesday that Trump has toyed with the idea of selecting and announcing Powell's replacement by September or October. Analysts say that person could operate as a shadow Fed chair, undermining Powell's influence. Fed policymakers Christopher Waller and Michelle Bowman have also both said in the past week that the Fed should cut rates soon, as inflation continues to ease and due to rising concerns about a weakening labor market. Data on Thursday showed that the number of Americans filing new applications for jobless benefits fell last week, though continuing claims rose to the highest level since November 2021. Fed funds futures traders are pricing in 65 basis points of cuts by year-end, up from 46 basis points on Friday, with the first cut expected in September. The euro was last up 0.39% at $1.1705 and reached $1.1744, the highest since September 2021. Sterling rose 0.45% at $1.3728 and got as high as $1.3764, its highest since October 2021. The Swiss franc hit a 10-1/2-year high at 0.80 per dollar. The dollar fell 0.61% to 144.38 Japanese yen. Falling interest rates would reduce the interest rate advantage of the dollar versus peers. It also comes as investors worry that tariffs will slow US growth. The Trump administration has set a July 9 deadline to negotiate deals that avoid reciprocal tariffs with trading partners. The dollar is also under pressure as international investors reallocate away from US assets on concerns about the outlook for the economy and the US currency. In cryptocurrencies, bitcoin fell 0.65% to $107,144.
