European equities traded little changed on Friday as a sharp rise in oil prices and fresh U.S. tariff measures offset support from corporate earnings, reinforcing expectations that inflationary pressures could keep interest rates elevated for longer.
The pan-European STOXX 600 remained broadly flat in early trading, with investors balancing geopolitical risks and trade tensions against the latest economic and corporate developments.
Oil rally and geopolitical tensions weigh on sentiment
Crude oil prices jumped more than 7%, pushing Brent above $100 per barrel for the first time in several months after U.S. President Donald Trump warned of a major military response against Iran and Yemen’s Houthi movement following continued attacks on commercial shipping in the Red Sea and Persian Gulf.
The surge in energy prices renewed concerns about imported inflation across Europe, where many economies remain heavily dependent on energy imports.
New U.S. tariffs increase pressure on global trade
Market sentiment was also affected after the United States introduced new import tariffs ranging from 10% to 12.5% on goods from 60 trading partners, including the European Union.
The White House said the measures target countries that do not adequately enforce restrictions on forced labour imports, replacing a previous 10% global tariff. The move adds further pressure on European exporters already facing weaker international demand and higher transportation costs.
The combination of higher energy prices and renewed trade tensions pushed Eurozone government borrowing costs to their highest levels in 15 years across both short- and long-term maturities.
Investors reassess central bank expectations
Bond markets reflected growing expectations that both the European Central Bank and the U.S. Federal Reserve could keep monetary policy tighter for longer, with the possibility of additional interest rate increases before year-end to contain inflation.
Attention later in the session will turn to preliminary Eurozone Purchasing Managers’ Index (PMI) data, which is expected to indicate that business activity remains subdued as companies continue to face high financing costs and rising input prices.
Energy stocks outperform while technology remains under pressure
Strong gains in major energy companies such as Shell and BP helped provide support for European equity markets, although broader investor sentiment remained cautious following weak signals from the global technology sector.
Germany’s DAX rose 0.5%, Italy’s FTSE MIB gained 0.2%, while France’s CAC 40 and London’s FTSE 100 each slipped 0.1%.
Overnight, Intel’s (NASDAQ:INTC) latest quarterly earnings failed to improve sentiment across Asian technology markets, while Tesla’s (NASDAQ:TSLA) latest cash burn figures increased concerns that heavy investment in artificial intelligence infrastructure is weighing on corporate cash generation.
With government bond yields remaining near multi-decade highs and oil prices continuing to climb, investors have increasingly favoured defensive sectors with stable cash flows while awaiting greater clarity on central bank policy.
Corporate movers
Among notable stocks, Ubisoft (EU:UBI) declined 4% after releasing its first-quarter sales figures, while Volkswagen AG (TG:VOW3) lost 3% following the publication of its latest quarterly results and outlook.
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