European equities experienced a modest decline on Tuesday, with the continent-wide STOXX 600 index falling 0.2% to 552.41 points by early trading, as investors navigated uncertainties tied to Swiss banking reforms and awaited crucial updates from the second day of US-China trade negotiations in London.
The spotlight remains firmly on the high-stakes discussions between the world’s two largest economies. While US President Donald Trump offered a cautiously optimistic outlook on Monday, he refrained from sharing concrete details, leaving markets jittery. The global financial community is closely watching for any signals that could indicate progress or a potential easing in the ongoing trade conflict, which has rattled supply chains and cast a shadow over economic growth prospects.
Laura Cooper, head of macro credit and investment strategy at Nuveen, emphasized the cautious market mood: “Markets are taking a more upbeat tone on hints of progress but this is going to underpin choppy price action as there’s a lack of clarity on what an actual deal could be. Until we see a substantial trade deal emerge, attention will be on the end of that 90-day pause and its implications if there isn’t a deal in place.”
Among sectors, financial services took a hit, dropping 1.2%, led notably by Swiss banking giant UBS. The stock declined nearly 4%, erasing earlier gains made last Friday, as investors responded to new Swiss government proposals requiring UBS to hold an additional $26 billion in capital. The Swiss markets reopened after a holiday closure on Monday, bringing the latest developments into sharp focus.
Defence shares also declined, hitting their lowest levels in over a week, reflecting a pullback possibly driven by profit-taking and valuation adjustments. However, Cooper noted that the broad rotation within European equities retains momentum, hinting at a potentially dynamic market ahead.
Energy stocks bucked the downward trend, rising almost 1% amid climbing oil prices. The healthcare sector also gained 0.5%, buoyed by Novo Nordisk’s 3% surge following reports that activist hedge fund Parvus Asset Management is accumulating a stake in the pharmaceutical company. Vaccine makers such as AstraZeneca and Sanofi saw share price gains despite the US health secretary’s recent decision to disband the vaccine advisory committee, underscoring the sector’s resilience.
Most regional indexes moved higher, with London’s FTSE among the top performers. Data released showed that British pay growth sharply decelerated in the three months to April, while unemployment reached its highest level in nearly four years. These labor market trends are strengthening arguments for an interest rate cut by the Bank of England to support economic growth.
In company-specific moves, British homebuilder Bellway jumped 4.1% after raising its full-year volume production forecast, signaling confidence in the housing market. Meanwhile, Aberdeen’s shares soared 7.5%, topping the STOXX 600, following a stock upgrade to “overweight” from “neutral” by J.P. Morgan, signaling optimism for the fund manager’s outlook.
As European markets react to these varied forces — from geopolitical negotiations and domestic policy shifts to sectoral rotations — investors remain watchful, balancing hopes for trade progress with cautious pragmatism amid lingering uncertainties.
