European equities edged lower on Thursday as investor sentiment was rattled by renewed geopolitical concerns in the Middle East and growing skepticism over U.S.-China trade progress. By 03:05 ET, Germany’s DAX had fallen 0.9%, France’s CAC 40 declined 0.4%, and the FTSE 100 in London remained nearly flat.
Doubts Cloud U.S.-China Trade Agreement
Optimism around a U.S.-China trade agreement waned overnight despite U.S. President Donald Trump’s assertion that a deal had been finalized. However, with Chinese President Xi Jinping yet to publicly endorse the agreement and key details still unclear, confidence has slipped. U.S. restrictions on advanced AI chip exports to China also remain in force.
Adding to trade tensions, President Trump stated on Wednesday that formal notifications on new tariffs would be sent to major global economies in the coming weeks. This move has cast doubt on the possibility of sealing additional trade deals before the July 9 deadline, and a recent Schroders survey identified trade-related fears as the top concern among global investors.
Rising Middle East Tensions Pressure Markets
Market jitters were further fueled by rising instability in the Middle East. President Trump announced the withdrawal of U.S. personnel from Iraq and neighboring countries, citing increasing security threats. He also expressed fading confidence in nuclear negotiations with Iran, warning that uranium enrichment by Tehran would not be tolerated.
Reports suggest Israel may be preparing for a potential military strike if U.S.-Iran talks break down, compounding fears of regional conflict. Additional discussions between U.S. and Iranian officials are expected over the weekend.
UK Economic Data Shows Unexpected Contraction
The UK economy contracted sharply in April, with GDP falling 0.3% from March, well below expectations. It marks the largest monthly drop since October 2023. According to the Office for National Statistics, the downturn was exacerbated by steep declines in exports to the U.S., linked to the recent imposition of American tariffs.
ONS director Liz McKeown noted that April saw the most significant monthly drop in goods exports to the U.S. in recent years, affecting nearly every major export category.
Tesco Reports Solid Q1 Growth
Retail giant Tesco PLC (LSE:TSCO) posted a 5.5% rise in group like-for-like sales for the first quarter of its 2025–26 financial year. Growth was seen across all key regions, including the UK, Ireland, Booker, and Central Europe, underpinning the company’s strong market position.
Crest Nicholson Shows Strategic Progress
UK housebuilder Crest Nicholson (LSE:CRST) delivered stable interim results, suggesting its refreshed business strategy is gaining traction despite ongoing challenges in the property sector.
Oil Prices Retreat After Geopolitical Surge
Crude prices slipped early Thursday, reversing some of Wednesday’s sharp gains. Brent crude fell 0.8% to $69.20 a barrel, while West Texas Intermediate declined 0.7% to $67.67.
The previous day’s rally—over 4%—was driven by fears of conflict in the Middle East, which could disrupt major oil routes and production infrastructure. However, Thursday’s modest retreat reflected cautious profit-taking as markets digested the latest geopolitical developments.
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