European stocks decline amid tariff sentiment
UK spending plans risk creating a “snowball effect” that increases borrowing costs
The UK government intends to raise public spending, a move that could inflate annual interest payments, which currently reach $143 billion. Analysts warn this initiative might induce anxiety in the bond market.
Long-term borrowing costs surged to new highs in January, with gilt yields firmly situated at around 5% for 20 and 30-year bonds.
One commentator expressed concern that the UK’s spending plan might strain efforts to manage national debt, suggesting more borrowing could occur until financial stability is restored.
Oil prices fall 2% as traders see the Israeli-Iran conflict
Crude oil futures slipped by approximately 2% as traders keep an eye on Middle Eastern tensions.
The US West Texas Intermediate dropped by $1.2 (1.76%) to $66.96 a barrel. Meanwhile, the global benchmark Brent fell by $1.17 (1.68%) to $68.61 per barrel.
Reports indicate that Israel is considering military action against Iran, potentially without US backing.
Oil prices had previously risen over 4% after the US State Department revealed plans to evacuate non-essential personnel from its embassy in Baghdad.
Denmark and Dutch Pension Funds Reduce Exposure: BNP Paribas
BNP Paribas highlighted how European investors are scaling back their exposure to the US dollar in a recent note.
The Danish pension fund has cut its US dollar exposure by $37 billion since the year’s start, while the Dutch pension fund’s exposure has decreased by about $50 billion.
“Our analysis suggests there is still more to come,” the report states.
The US dollar index experienced a 0.7% drop on Thursday, marking an approximate 10% decline over the year.
The euro surges to a 3.5-year high against weakening of the US dollar
The euro appreciated more than 1% to $1.16, its highest level against the US dollar since November 2021. This shift occurs as US tariff policies create volatility in stock markets worldwide.
ING’s senior economist remarked that tariffs seem to be a permanent fixture, and previous transactions appear “mostly symbolic.” Details surrounding the US-China deal remain unclear and could still fall apart.
“We believe the average tariff rate is unlikely to change significantly as other measures may counterbalance any reductions from trade agreements or legal rulings,” she added.
Stocks on the move: semiconductors, Tesco, Twy
European stock markets are in decline during morning trading, with the Stoxx 600 index down by 0.7% as global trade uncertainty lingers. The UK FTSE 100, after reaching record highs, fell about 0.2%.
The semiconductor sector stands out with a 7.3% increase following Dutch chip equipment manufacturers raising their long-term revenue forecasts.
British grocery chain Tesco gained 3% as investors reacted positively to its sales growth and consistent guidance, suggesting robust performance.
Conversely, travel stocks faced losses, exacerbated by reports of an Air India plane crash near Ahmedabad, resulting in a 7% decline in shares.
UK assets after weak economic data
The British Pound fell by 0.3% against the euro after the National Statistics Bureau reported a widening trade deficit. Despite this, it remained relatively stable against the US dollar.
Bond yields for British government securities are declining significantly, with the 10-year gilt yield down 4 basis points. This week, investors have been cautious due to the UK government planning increased spending, alongside a noted cooling in wages and fewer job openings, which has influenced market expectations about interest rate cuts.
European stock markets operate lower
European stock markets have significantly declined, with the Stoxx 600 index falling 0.42%. Almost all sectors are in the red, particularly travel, which saw a drop of 1.5%.
The UK exports to the US in record amounts as tariffs bite
UK exports to the US decreased by £2 billion ($27.1 billion) in April, marking the largest monthly drop since records began in 1997. This drop is likely linked to new tariffs on goods entering the US.
Meanwhile, US imports to the UK fell by £400 million in the same period.
The UK and US announced a preliminary trade agreement in early May, but a 10% tariff on British goods remains largely in effect and has not yet been fully instituted, impacting sectors like steel and automobiles.
Overall, the UK goods trade deficit rose by £600 billion over the three months leading up to April, despite an increase in the trade surplus for services.
GDP data is “clearly disappointing,” Finance Minister Reeves says
UK Finance Minister Rachel Reeves described the latest GDP figures as “clearly disappointing,” noting a contraction of 0.3%. She emphasized the government’s commitment to fostering growth and improving financial conditions for citizens.
Reeves presented a detailed spending review aimed at boosting employment and growth through extensive government investment in areas like urban transport and housing, stating that their mission remains intact despite current challenges.
Tariffs are currently the biggest macroeconomic concern for two in three investors
Research from investment manager Schroders indicates that rising tariffs and trade tensions are now the primary concern for many global investors, overshadowing other economic risks.
Almost two-thirds of institutional investors surveyed pinpointed trade issues as the most significant macroeconomic worry influencing their strategies.
What should you pay attention to today
CNBC continues its coverage of the Vivedch Summit in Paris and reports on Goldman Sachs’ Annual European Financial Conference in Berlin.
In upcoming data, the UK’s monthly GDP figures are set to be released, alongside revenue reports from retail giant Tesco.
This is the opening call
Welcome to CNBC’s live coverage of European market actions and the latest regional and global business news. Current data suggests that London’s FTSE has dropped by 33 points, Germany’s DAX is down by 189 points, France’s CAC 40 has fallen by 44 points, and Italy’s FTSE MIB decreased by 282 points.
