European Stocks Steady Ahead of Trade Deadline and Key Inflation Data

Global Market Caution Amid U.S. Trade Negotiations

European stocks traded cautiously on Tuesday, as investors remained on edge ahead of the Trump administration’s looming July 9 tariff deadline and the release of crucial inflation data. At 03:05 ET (07:05 GMT), the DAX index in Germany gained 0.1%, the CAC 40 in France climbed 0.1%, and the FTSE 100 in the U.K. rose 0.3%, reflecting the steady mood in global equity markets.

The prevailing optimism in global markets has been largely driven by expectations that the U.S. administration will reach several trade deals before next week’s deadline, especially following the recent announcement that the U.S. had finalized a trade deal with China.

In addition to the U.S.-China deal, Canada’s move to withdraw its digital services tax on tech companies in a bid to revive stalled trade talks with the U.S. has bolstered sentiment further. However, U.S. President Donald Trump’s strained comments about Japan, calling it “spoiled,” highlighted ongoing tensions as negotiations between the two countries remain unresolved. U.S. Treasury Secretary Scott Bessent also warned that nations could face steep tariffs, even amid ongoing good-faith negotiations, but expressed optimism for a series of trade deals ahead of the July 9 deadline.

In Europe, European Commission President Ursula von der Leyen remained hopeful that a deal could be reached before the deadline. However, if no agreement is reached, the U.S. plans to impose a 50% tariff on nearly all EU products, and the European bloc is prepared to respond with its own set of countermeasures.

Eurozone Inflation Data in Focus

The major data release in Europe on Tuesday was the latest preliminary inflation data from the eurozone, which analysts expect to have reached 2% year-over-year in June, in line with the European Central Bank’s (ECB) target. Earlier this month, the ECB made its eighth interest rate cut of the year, signaling its readiness to pause at its next meeting amid concerns about the ongoing trade tensions with the U.S.

The ECB has cut interest rates by a total of two percentage points since June 2024 to support the eurozone economy, which was already under pressure before being further affected by the volatility of U.S. economic and trade policies. The central bank’s decision to pause interest rate cuts this month reflects its cautious approach as it monitors the economic impact of trade developments.

Additionally, investors were waiting for manufacturing purchasing managers’ indexes (PMI) data for France, Germany, and the eurozone for June. The PMI data will provide crucial insights into the health of the eurozone’s manufacturing sector, which has been a key focus of policymakers amid the region’s economic challenges.

Sodexo and Renault Earnings Updates

In the corporate sector, French food service company Sodexo (EPA:EXHO) reported that it expects fiscal 2025 revenue growth to be at the lower end of its forecast range. The company highlighted mixed regional performance and currency headwinds, although it reiterated its full-year guidance for organic revenue growth of 3% to 4% and a 10 to 20 basis point improvement in its underlying operating profit margin at constant currencies. Despite these challenges, Sodexo remains optimistic about its outlook but now expects to reach the lower end of its growth range.

Meanwhile, French carmaker Renault (EPA:RENA) reported that it would record an extraordinary loss of approximately €9.5 billion ($11.2 billion) on its stake in Nissan (OTC:NSANY) Motor during the first half of 2025. This loss follows the company’s decision to change the accounting method it uses for the investment in Nissan.

Sainsbury Reports Strong Retail Sales

In the U.K., J Sainsbury (LON:SBRY) reported a 4.9% increase in retail sales excluding fuel for the first quarter of the 2025/26 financial year. The company’s performance marked its highest market share in nearly a decade, signaling strength in the U.K. retail sector despite broader economic uncertainties. This positive performance by Sainsbury contrasts with the challenges faced by other retailers, especially in the face of economic pressures and rising inflation.

Trade Uncertainty and Inflation Data Keep Investors on Edge

As the market remains cautious ahead of the U.S. tariff deadline and key economic data releases, investor sentiment is largely shaped by the uncertainty surrounding U.S. trade negotiations and the economic impact of Trump’s tax-and-spending bill. With global trade relations still in flux, the focus will remain on whether these uncertainties will weigh on economic growth in the coming months, particularly in the eurozone and major economies like the U.S., China, and the U.K.

At the same time, inflation data and manufacturing PMI readings will provide further insight into how economic activity is unfolding in the face of rising geopolitical tensions and trade risks.