European shares flat ahead of tariff negotiations

The pan-European STOXX 600 index was up 0.01 per cent, retreating from opening gains of as much as 0.4 per cent and hovering near its strongest level since July 31

European shares were broadly flat on Monday, as investors refrained from making big bets ahead of a key U.S. inflation data, tariff negotiations and talks between the U.S. and Russia on the war in Ukraine.

The pan-European STOXX 600 index was up 0.01 per cent as of 0920 GMT, retreating from opening gains of as much as 0.4 per cent and hovering near its strongest level since July 31.

Trump said a potential deal would involve “some swapping of territories to the betterment of both (sides).”

Hopes of a peace deal weighed on German defence companies. Shares of Rheinmetall dropped 4.7 per cent, while those in Renk and Hensoldt were down 3.3 per cent and 1.3 per cent, respectively.

Further weighing on European stocks was a 28 per cent plunge in Orsted after the Danish wind farm developer unveiled a 60-billion-crown ($9.4 billion) rights issue, citing adverse developments in the U.S. offshore wind market.

Despite concerns about Trump’s tariffs, a strong U.S. earnings season, driven by optimism about AI, and expectations of interest rate cuts from the U.S. Federal Reserve have pushed U.S. stocks to record highs. Europe’s STOXX 600 remains about 3 per cent away from its March record high.

We’re in a slightly odd and probably unstable equilibrium at the moment where everything feels a little bit (like) Goldilocks, said Legal & General global equity strategist Robert Griffiths, pointing to the limited impact of tariffs on inflation and companies’ margins so far.

He said: But that probably isn’t an equilibrium. Answering the question, who’s paying the tariffs, is going to be critical for determining how good or bad that second-half proves for markets.