European equity markets traded slightly higher on Tuesday as a series of encouraging corporate earnings reports helped counter investor concerns over persistent inflation and rising bond yields ahead of the US Federal Reserve’s latest policy decision.
The pan-European STOXX 600 gained 0.2% in early trading. Germany’s DAX also advanced 0.2%, France’s CAC 40 climbed 0.5%, while London’s FTSE 100 traded broadly unchanged.
Among the strongest performers was Unilever (LSE:ULVR), whose shares jumped around 6% after the consumer goods group reported second-quarter underlying sales growth ahead of market expectations. The performance was supported by resilient sales volumes and continued pricing strength across its personal care and food businesses.
Unilever’s results were viewed as a positive indicator for the wider European economy, suggesting consumer demand for essential household products remains resilient despite higher borrowing costs and ongoing inflationary pressures.
Luxury giant LVMH (EU:MC) gained 2.6% after reporting improved second-quarter sales, supported by solid demand for luxury goods in the United States.
Telecommunications group Orange (EU:ORA) rose nearly 4% after increasing its full-year profit and cash flow guidance.
In the automotive sector, Mercedes-Benz (TG:MBG) advanced 3.5% after reporting stronger second-quarter profit, despite lowering its vehicle sales forecast for 2026. Fellow German manufacturers BMW (TG:BMW) and Volkswagen (TG:VOW3), the parent company of Audi, also gained around 2%.
Elsewhere, French aerospace supplier Safran (EU:SAF) moved higher after raising its financial targets for the full year following record first-half operating margins.
Dutch healthcare technology company Philips (EU:PHIA), however, fell 8.5%, despite reporting second-quarter core earnings that exceeded analyst expectations.
As the European reporting season gathers pace, company results continue to highlight diverging trends across industries. Luxury goods manufacturers and some industrial businesses remain under pressure from higher interest rates and weaker consumer spending, while defensive sectors such as consumer staples, healthcare and aerospace continue to demonstrate resilient demand, pricing power and operational strength.
Although oil prices continued to soften, European equity markets remained cautious as government bond yields stayed elevated. Investors continue to expect central banks to maintain relatively high interest rates in the near term, limiting support for equity valuations.
Additional pressure came from comments by European Central Bank Governing Council member Peter Kazimir, who said another interest rate increase in September could still be appropriate even if the Eurozone economy improves, reinforcing expectations that policymakers remain focused on tackling inflation.
Attention is now shifting to the United States, where the Federal Reserve begins its two-day policy meeting ahead of Wednesday’s interest rate announcement. While policymakers are widely expected to leave rates unchanged, investors will closely monitor Chair Kevin Warsh’s remarks for signals on the future direction of monetary policy.
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