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European equity indices edged higher on Friday, extending monthly gains, as cooling inflation data bolstered expectations for another European Central Bank (ECB) rate cut, even as U.S. trade policy uncertainty persisted after President Donald Trump’s tariffs were reinstated.
By 04:35 ET (08:35 GMT), Germany’s DAX rose 0.6%, the CAC 40 in France gained 0.2%, and the U.K.’s FTSE 100 advanced 0.5%. The DAX is leading European markets with a monthly gain of over 7%, climbing to record highs, as investors shifted away from U.S. assets amid fiscal worries and easing global trade tensions.
Cooling Inflation Strengthens ECB Rate Cut Outlook
Friday’s data added to the dovish momentum, with Spain’s EU-harmonised inflation rate for May dropping to its lowest since October. Regional German inflation prints also signaled further cooling, while German retail sales declined 1.1% in April.
These signs of subdued economic activity reinforce market bets on an eighth consecutive ECB rate cut at its June 5 meeting, with expectations for the deposit rate to be lowered to 2.00% from 2.25%.
Trump’s Tariffs Reinstated, Legal Battle Continues
Meanwhile, the legal saga around Trump’s trade tariffs continued to inject volatility. A U.S. appeals court reinstated Trump’s tariffs just a day after they were blocked by the U.S. Court of International Trade. The next hearing is set for June 5, with a potential escalation to the Supreme Court. The legal back-and-forth has left businesses hesitant, delaying investment, hiring, and rate-cut decisions.
Corporate Movers: Sanofi Slides, M&G Surges
In corporate news, Sanofi (EPA:SASY) and Regeneron (NASDAQ:REGN) shares dropped after disappointing phase 3 trial results for their chronic obstructive pulmonary disease treatment, Itepekimab.
Conversely, M&G (LON:MNG) surged after Japan’s Dai-Ichi Life Holdings announced plans to acquire a 15% stake in the British insurer and asset manager as part of a strategic partnership.
Oil Steady as OPEC+ Meeting Looms
Oil prices edged up but remained on course for a second consecutive weekly loss, as traders awaited the outcome of the OPEC+ meeting, where an output hike is expected to be confirmed.
By 04:35 ET, Brent crude futures rose 0.4% to $63.59 a barrel, and U.S. West Texas Intermediate gained 0.5% to $61.22 a barrel. Both benchmarks are down around 1.5% this week, weighed by uncertainty over Trump’s tariffs and their impact on global demand.
With the ECB poised for another rate cut, the tariff drama unfolding in U.S. courts, and OPEC+ decisions on the horizon, European markets remain on edge, navigating a complex landscape of macroeconomic and geopolitical factors.
