European stocks were muted as a key report on US inflation offered some relief to investors, with attention now turning to the European Central Bank’s policy decision.
The Stoxx Europe 600 Index was little changed at the close, erasing losses of as much as 1% after May US core inflation accelerated less than forecast . Sectors rotated noticeably, with personal care as well as food and beverage stocks outperforming, while cyclicals led by miners and autos lagged.
The inflation reading is “a major relief to this market as well as the Fed as they meet next week,” said Jay Woods, chief market strategist at Freedom Capital Markets.
European stocks swung lower earlier in the session while oil prices climbed after US President Donald Trump wrote on social media that Iran “will have to pay the price” for taking too long to negotiate a deal. The conflict remains front of mind for investors after a round of strikes between the two sides.
“I think oil — and thus Europe as well — is taking Trump seriously, but not literally,” said Stephan Kemper, chief investment strategist at BNP Paribas Wealth Management. “Investors have reasons to keep their ‘glass half full’ approach.”
The European Central Bank is expected to deliver its first interest rate hike since September 2023 on Thursday. Barclays Plc’s Emmanuel Cau wrote that if the ECB opts for a “one hike and done” approach, it could provide relief for lagging bond proxies and consumer shares.
Among individual stocks, WH Smith Plc fell 16% after the UK retailer lowered its profit outlook and set out a plan to raise capital as the impact of the Iran war weighs on sales.
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