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European stocks rose on Friday, recovering from three consecutive sessions of losses, as investors reacted to mixed developments in the Middle East conflict and central bank policies.
At 03:15 ET (07:15 GMT), the DAX index in Germany rose 0.8%, the CAC 40 in France climbed 0.6%, and the FTSE 100 in the U.K. gained 0.4%. Despite the rebound, all three indices were still set to post weekly losses, with the DAX down nearly 2%, the CAC 40 down 1.7%, and the FTSE 100 off by 0.7% as of Thursday’s close.
Trump Delays Decision on U.S. Iran Involvement
Investor sentiment was buoyed after U.S. President Donald Trump postponed a decision on whether the U.S. would intervene in the Israel-Iran conflict, stating that the decision would come in “two weeks.” The delay helped alleviate some market fears that a U.S. strike on Iran was imminent, particularly after Trump had earlier suggested the possibility of joining Israel’s air campaign.
Trump has used two-week deadlines for other key decisions in the past, including tariff negotiations, and the hope now is that the delay will give Iran time to consider negotiations. The possibility of a more measured approach to U.S. involvement in the conflict provided relief to markets that had been on edge due to escalating geopolitical tensions.
Dovish Signals from Central Banks
Investor sentiment was further supported by dovish signals from several central banks. On Friday, China kept its benchmark lending rates unchanged, in line with expectations. This followed policy meetings earlier in the week from European central banks.
The Norges Bank (Norway’s central bank) cut its rate for the first time since 2020, while the Swiss National Bank reduced its rates to zero, leaving the door open to further rate cuts. The Bank of England (BoE) also kept its rates steady but signaled the potential for further easing as it assessed the economic environment. This dovish stance was reinforced by weak U.K. retail sales data.
U.K. Retail Sales Decline More Than Expected
Retail sales in the U.K. dropped by 2.7% in May, a much sharper decline than the 0.5% fall forecasted. The Office for National Statistics (ONS) reported that the decrease followed a strong demand period in the previous month, when consumers splurged on food, summer clothes, and home improvements.
The weak retail sales numbers added to concerns about the broader economic outlook and underscored the challenges faced by the Bank of England in navigating inflation and economic growth risks.
German Producer Prices in Line with Expectations
In Germany, producer prices fell by 1.2% on the year in May, in line with expectations. The decline suggests that inflationary pressures in the manufacturing sector may be easing, further adding to the global economic uncertainties.
Berkeley Group Changes Leadership Amid Regulatory Pressures
In the corporate sector, British homebuilder Berkeley Group reported an increase in pretax profit for the year ending April 30, despite facing regulatory pressures and lower forward sales. The company also announced changes in its leadership, with Chairman Michael Dobson set to step down at the company’s AGM in September. CEO Rob Perrins will become Executive Chair, while CFO Richard Stearn will take over as CEO.
Crude Oil Prices Slip Amid U.S. Decision Delay on Iran
Crude oil prices fell on Friday following President Trump’s decision to delay a decision on U.S. involvement in the Israel-Iran conflict, though prices were still poised for a third consecutive week of gains.
At 03:15 ET, Brent crude futures dropped 2.6% to $76.79 per barrel, while U.S. West Texas Intermediate (WTI) crude futures fell 0.4% to $73.61 per barrel. Despite the pullback, the broader upward trend in oil prices remained intact, with geopolitical tensions and the potential for further disruptions in the Middle East continuing to provide support to crude prices.
Outlook
While Friday’s gains in European equities were encouraging, investors remain cautious due to the ongoing geopolitical risks, particularly in the Middle East, and the potential for further economic uncertainty. Central banks’ dovish signals, combined with weak economic data from the U.K. and concerns about future interest rate moves, are likely to keep market sentiment volatile in the near term. Meanwhile, oil prices will continue to be influenced by developments in the Israel-Iran conflict and potential U.S. intervention.
