European Midday Briefing : Stocks Slip as U.K. Economy Hit by Tariffs

MARKET WRAPS

Stocks in Europe fell on lingering trade uncertainty and rising geopolitical tensions.

Despite a tentative U.S.-China trade deal taking shape, uncertainty remains over the specifics as well as broader trade developments.

Meanwhile the U.S. moved to withdraw some personnel in the middle east amid rising tensions with Iran, prompting a rise in risk-off sentiment.

U.K. GDP fell 0.3% in April on a hit from tariffs , pointing to a Bank of England interest-rate cut in August, according to Capital Economics.

U.S. Markets:

Stocks were pointing lower.

The Treasury's 30-year bond auction will be in focus later Thursday.

"Yesterday's cool inflation print has reduced some degree of risk around the sale," Pepperstone said.

Forex:

The dollar fell to seven-week lows against a basket of currencies and against the euro, extending the previous day's drop after the lower-than-forecast U.S. inflation data.

The figures increase prospects of the Federal Reserve cutting interest rates.

Meanwhile, the dollar wasn't benefiting from U.S.-China trade talks or from strong demand at Wednesday's 10-year Treasury auction, ING said.

NP Bank added that the tariff debate was weighing heavily on the currency, with investors favoring European markets instead, which is helping the euro.

The Japanese yen and the Swiss franc strengthened against the dollar amid rising geopolitical tensions.

Bonds:

The air was getting thinner for long-term eurozone government bond yields to fall as the ECB nears the end of its interest-rate cutting cycle, SALytic Invest said.

"Our interest rate strategy therefore remains defensively oriented towards long maturities."

Commerzbank said the performance in Bunds may lose steam.

This is due to a lack of catalysts and investor anxiety about the Treasury's 30-year bond auction later Thursday.

Treasury yields fell.

The downside surprise in U.S. CPI data gave only a small boost, probably because tariff-driven price hikes still look imminent, Capital Economics said.

"We don't expect much upwards pressure on Treasury yields even as the inflationary impact of tariffs eventually feeds into U.S. consumer prices."

Energy:

Oil prices slid after jumping more than 4% in the previous trading session as investors monitor tensions in the Middle East and the latest U.S. trade policy developments.

Meanwhile, U.S. crude-oil inventories fell more than expected last week, though gasoline and distillate fuel stocks climbed.

The crude oil market is set to be in surplus by 4Q, which may extend into 2026, Morgan Stanley said.

Metals:

Gold futures rose on safe-haven demand.

The precious metal has gained after Trump's negative commentary on negotiations with Iran over a nuclear agreement, Pepperstone said.

Dollar weakness and tariff-related market uncertainty have also contributed to gold's gains.

EMEA HEADLINES

Tesco Sales Rise as Market Share Increases Despite Tough Competition

U.K. grocer Tesco maintained its full-year expectations after sales climbed in its first quarter, when it continued to gain market share despite fierce competition in the sector.

The supermarket on Thursday posted 16.38 billion pounds ($22.19 billion) in group sales excluding value-added tax and fuel for the 13 weeks ended May 24, rising 4.6% on a like-for-like basis.

Airbus Expects 3.6% Annual Air Traffic Growth to Fuel Demand for New Planes

Airbus said it expects passenger traffic to grow 3.6% annually over the long term, led by growth in domestic India flights and across Asia.

The plane manufacturer said that the growth in air travel will require 43,400 new passenger and freighter aircraft deliveries over the next 20 years. Around 34,250 will be single aisle and 9,170 will be widebodies, it said.

Fears Over U.S. AI Dominance Boost Business for France's Mistral

PARIS-Trans-Atlantic tensions are boosting demand in Europe for homegrown artificial-intelligence tools, helping the continent's most prominent AI developer finance its efforts to keep up with global rivals.

European companies and governments increasingly want AI tools that aren't dependent on American tech behemoths, Arthur Mensch, chief executive of France's Mistral AI, said in an interview Wednesday. The trend is accelerating the adoption of Mistral's AI models, putting the company on pace to earn revenue of more than $100 million a year, Mensch said.

The 'Ghost of al-Qassam' Becomes Hamas's Third Leader in Seven Months

After more than 600 days of war and years of being steered by the brothers Yahya and Mohammed Sinwar, Hamas has a new leader in the Gaza Strip.

The U.S.-designated terrorist group has handed control of its operations in the enclave to Ezzedin al-Haddad, an experienced fighter who helped plan the deadly Oct. 7, 2023, attacks, recruits the organization's fighters and oversees the captivity of Israeli hostages, keeping photos of many on his phone, Arab and Israeli officials and a former hostage said.

GLOBAL NEWS

Supply Chains Become New Battleground in the Global Trade War

SINGAPORE-A key lesson from the latest skirmish in the U.S.-China trade war: The era of weaponized supply chains has arrived.

Earlier this week, Washington and Beijing ended a standoff involving the most potent new tool in superpower statecraft-export controls. As part of a monthslong trade fight, the two sides choked off the supply of such exports as rare earths or semiconductor technology in a bid to gain an edge.

China Puts Six-Month Limit on Its Ease of Rare-Earth Export Licenses

China is putting a six-month limit on rare-earth export licenses for U.S. automakers and manufacturers, according to people familiar with the matter, giving Beijing leverage if trade tensions flare up again while adding to uncertainty for American industry.

Beijing's agreement to temporarily restore rare-earth licenses was one of the key breakthroughs in the latest round of intense trade talks in London, but the six-month limit illustrated how each side is retaining the tools to easily escalate tensions again.

Bond Market Prepares for Big Treasury Auction to Settle Demand Doubts

U.S. debt auctions have seen good demand-great even, in some cases. Yet, concerns about buyers not showing up at the next bond buffet persist. Thursday's auction might quieten the chatter.

The U.S. Treasury Department is selling $22 billion worth of bonds maturing in 30 years on Thursday. The government routinely auctions debt to fund the government. Lately, however, these sales have seen heightened interest as investors look for any sign that demand for U.S. debt has materially fallen globally, either because of President Donald Trump's tariffs on foreign countries or the excessive amount of bonds in the financial system-or both.

Texas Governor to Deploy National Guard as Anti-ICE Protests Spread

Texas Gov. Greg Abbott said he would deploy the National Guard across parts of the state as protests against ICE raids have gripped Los Angeles and resulted in hundreds of arrests spread across the country.

"Texas is a law and order state, and we will use every tool that we can to ensure order across our state," Abbott said. He declined to comment on where the troops would be stationed in Texas and how many would be deployed.

Trump-Newsom Legal Fight Over Troops Has Little Modern Precedent

WASHINGTON-President Trump's confrontation with California moves to a San Francisco courtroom on Thursday, where Gov. Gavin Newsom is seeking a judicial order blocking the White House from deploying National Guard units and Marines to aid the administration's deportation campaign in Los Angeles.

The conflict reflects perhaps the most combustible flashpoint between Trump's aggressive assertions of executive authority and the remaining redoubts of Democratic power: blue states such as California, which for months have been worried that Trump could federalize National Guard units that normally operate under their governors' command.

RFK Jr. Names Eight Vaccine Panel Replacements, Including Covid-Shot Skeptics

Health Secretary Robert F. Kennedy Jr. on Wednesday announced eight new picks for a key immunization committee, including vaccine opponents.

Kennedy's move came two days after abruptly removing all 17 of the prior members of the Advisory Committee on Immunization Practices. The panel makes vaccine recommendations to the Centers for Disease Control and Prevention, including when and how often children and adults should get them.

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This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

06-12-25 0500ET