European Markets Rally on Wednesday After Trump Threatens to Cut All Trade with Spain
The regional Stoxx 600 index rose 1.2% by mid-morning in London, rebounding sharply from a volatile session driven by Middle East tensions and a new transatlantic trade dispute.
European stock markets recorded gains on Wednesday, following a period of volatility linked to developments in the Middle East and bilateral trade threats between the United States and Spain.
Country-specific indices also advanced, with London's FTSE 100 up 0.4%, Germany's DAX up 1.5%, France's CAC 40 up approximately 1%, and Spain's IBEX 35 up 1.5%.
The Trigger: A Trade Threat from Washington
This uptick followed a statement by U.S. President Donald Trump threatening to cease all trade with Spain. The statement was issued after Spain declined a request to allow U.S. forces to use its bases for strikes on Iran.
"We're going to cut off all trade with Spain. We don't want anything to do with Spain," President Trump stated on Tuesday.
Spain's Response
Spanish Prime Minister Pedro Sanchez, in a televised address on Wednesday morning, criticized the U.S. and Israeli strikes on Iran, describing them as a "disaster" and comparing the situation to the 2003 invasion of Iraq.
Market Context
Regional stocks had traded lower on Tuesday, with the conflict cited as a factor influencing global investor sentiment. Sectors such as banking, insurance, travel and leisure, and utilities experienced losses during that session.
The higher opening on Wednesday coincided with continued U.S. and Israeli operations against Iran overnight. Western countries are reportedly organizing evacuation flights for their citizens in the region.
Later Market Developments: Friday's Close
By Friday, European shares continued their upward trend. The Stoxx 600 rose 0.6% in afternoon trading, heading for a weekly gain of 2.25%. Major bourses in London, Paris, Frankfurt, and Milan all traded higher, with most sectors in positive territory.
Corporate News
- Shares of Spanish beauty conglomerate Puig declined 13.4% after discussions with Estée Lauder regarding a potential business combination ended.
- Estée Lauder shares rose nearly 11% in premarket trading in New York.
Economic Data
UK Retail Sales:
- Fell 1.3% in April month-on-month, following a 0.6% rise in March.
- Fuel sales declined more than 10%, with retailers attributing the drop to motorists conserving fuel amid price volatility linked to the Middle East conflict.
German Consumer Confidence:
- GfK's June indicator improved to -29.8 from -33.1, driven by higher income expectations.
French Manufacturing Climate:
- Index rose to 102 in May from 100 in April, the highest in four months.
UK Government Borrowing:
- April borrowing reached £24.3 billion, £3.4 billion above forecasts.
- The budget deficit for day-to-day spending was £17.4 billion, exceeding forecasts by £2.6 billion.
Bond Yields:
- The UK 10-year Gilt yield fell 6 basis points to 4.907%.
Sterling:
- The pound traded at $1.3425, broadly flat against the dollar.
Oil Prices
Oil prices continued to rise on Friday. Brent crude increased 1.2% to $103.77 per barrel.
The price rise followed reports that Iran would insist on retaining enriched uranium, renewing concerns about a prolonged conflict affecting oil supply.
US Futures
US stock futures edged higher on Friday:
- S&P 500 futures up 0.17%
- Dow Jones futures up 0.55%
- Nasdaq futures up nearly 0.1%