European stock indices were mixed in early trade on Tuesday as investors continued to monitor developments across the Middle East. All the majors showed signs of consolidation following yesterday’s sharp bounce after trading at multi-month lows earlier in the session.
In fact, the German DAX hit its lowest level since last April. President Trump’s comments on social media triggered a sharp rally across European and UK equities yesterday morning. He claimed that weekend talks between the US and Tehran had been productive, and so he was delaying further US attacks on Iran’s energy infrastructure for five days.
Source: TN Trader
But Iran countered Mr Trump’s claims, and as things stand, the Strait of Hormuz remains blocked to most shipping. European equities had outperformed the US for the first two months of this year as they were seen as more attractive from a valuation perspective. But elevated oil prices have damaged that thesis as Europe is badly exposed to higher energy costs, relying as it does on imported oil and gas, unlike the US.
This morning’s release of Flash Manufacturing and Services PMIs showed a general improvement in the manufacturing sector, while services disappointed. This should weigh on sentiment, given the importance of the service sector to the economies across Europe and the UK.
