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Investing.com - European stocks mostly fell Thursday on heightening tensions in the Middle East as well as waning confidence in the likely success of the U.S.-China trade agreement.
The DAX index in Germany dropped 0.9% and the CAC 40 in France slipped 0.1%. However, the FTSE 100 in the U.K. gained 0.2%.
Slipping U.S./China trade confidence
Confidence in the progress of trade talks between the U.S. and China appears to have retreated overnight, even after U.S. President Donald Trump’s declaration that a trade deal with China was “done.”
China President Xi Jinping is yet to give his approval on the ’deal’, details remain scarce and U.S. export restrictions on high-end artificial intelligence chips are still in place.
Additionally, U.S. President Donald Trump said on Wednesday that he will send letters to major economies setting his planned trade tariffs in the coming weeks, dashing hopes for more trade deals before a July 9 deadline to strike agreements with his administration.
Mounting trade tensions and tariffs have become the single biggest worry for global investors, overshadowing all other economic risks, according to a survey published by British investment manager Schroders (LON:SDR).
Middle East tensions
Also weighing on sentiment Thursday were rapidly rising tensions in the Middle East, after President Trump confirmed that the U.S. was pulling out personnel from Iraq and other Middle Eastern countries amid fears of military action.
This followed Trump signaling that he was losing confidence in nuclear talks with Iran, adding that Tehran will not be allowed to enrich any more uranium.
U.S. and Iranian officials are set to hold more talks over the weekend, but several reports have also indicated that Israel was preparing to attack Iran if nuclear talks with the U.S. fall through.
U.K. economy contracts
The British economy contracted sharply in April, with Trump’s announcement of wide-ranging tariffs weighing heavily on sentiment, official data showed on Thursday.
Gross domestic output shrank by a worse-than-expected 0.3% in April from March - the biggest monthly drop since October 2023 and a much bigger drop than the 0.1% fall forecast.
"After increasing for each of the four preceding months, April saw the largest monthly fall on record in goods exports to the United States with decreases seen across most types of goods, following the recent introduction of tariffs," Liz McKeown, ONS director of economic statistics, said.
Tesco (OTC:TSCDY) reports jump in quarterly sales
In the corporate sector, U.K. supermarket giant Tesco (LON:TSCO) reported a 5.5% increase in group like-for-like sales for the first quarter of the 2025-26 financial year, supported by growth across its U.K., Republic of Ireland, Booker and Central European operations.
Homebuilder Crest Nicholson (LON:CRST) has delivered reassuring first-half results, showing its new strategy is working effectively as the company navigates through changing housing market conditions.
Crude steady
Oil prices are mostly steady on Thursday, despite earlier declines, as the U.S. authorised voluntary departures for military dependents in the Middle East amid rising tensions with Iran.
At 11:48 ET, Brent futures dropped 0.1% to $69.69 a barrel and U.S. West Texas Intermediate crude futures rose 0.2% to $68.26 a barrel.
Both contracts surged over 4% on Wednesday during a turbulent trading session, supported by the progress in U.S.-China trade talks, which has helped reduce demand concerns, with free-flowing trade expected to boost global economic activity and thus crude demand.
Wednesday’s spike reflects heightened geopolitical risk, as investors feared any conflict could disrupt shipping routes or oil infrastructure across the Gulf.