Europe close: Markets mostly lower following afternoon slide

(Sharecast News) - European stocks closed mostly weaker on Tuesday as oil prices extended their gains and investors looked ahead to key risk events later in the week, including Donald Trump's response to a peace proposal from Iran.

The pan-European Stoxx 600 fell 0.37% to 606.58.

Germany's DAX declined 0.27% to 24,018.26, France's CAC 40 lost 0.46% to 8,104.09, while London's FTSE 100 edged up 0.11% to 10,332.79.

In commodities, Brent crude futures were last up 2.89% on ICE at $111.36 per barrel, and the NYMEX quote for West Texas Intermediate gained 3.55% to $99.79.

Oil prices continued to climb as investors awaited Trump's response to a peace proposal from Iran.

Reports suggested he was unlikely to accept the proposal because it sets aside discussions on Tehran's nuclear programme until the war has ended.

Reuters, citing a US official, said the proposal was unlikely to satisfy Washington, which says nuclear issues must be addressed from the outset.

"The oil price is on track for its seventh straight day of gains - hitting a three-week high - despite the United Arab Emirates leaving OPEC and OPEC+," said Axel Rudolph, chief technical analyst at IG.

"Crude prices rose to above $100, extending a seven-session rally as ongoing US-Iran tensions and near-zero traffic through the Strait of Hormuz intensified supply fears, though gains were partly capped by the UAE's decision to leave OPEC and OPEC+ while planning to increase output.

"This could undermine the group's cohesion, creating internal disarray and weakening OPEC+'s ability to present a unified stance on production and geopolitical issues."

Spain unemployment sees biggest spike since pandemic

Economic data offered a mixed backdrop.

Spain's unemployment rate rose to 10.83% in the three months through March, up 0.9 percentage points from the previous quarter, marking the biggest quarterly increase since the pandemic.

The rise was a rare setback for the euro area's best-performing major economy, although the country's Economy Ministry noted it was still the lowest first-quarter reading since 2008.

The quarter is traditionally weak for employment because it falls outside the tourist season, but the decline in the number of people in work was also the largest since 2020.

In the UK, shop price inflation slowed in April as retailers discounted clothing, furniture and DIY goods amid fragile consumer confidence.

The BRC-NIQ shop price monitor showed inflation easing to 1% from 1.2% in March, below the three-month average of 1.1%.

Food inflation slowed to 3.1% from 3.4%, while non-food prices fell 0.1%, reversing March's 0.1% increase.

Helen Dickinson, chief executive of the British Retail Consortium, said retailers were competing harder on price to stimulate spring spending, but warned: "While we've yet to see the full force of the Middle East conflict feeding into consumer prices, it will not be long before it begins to."

Mike Watkins, head of retailer and business insight at NIQ, said higher fuel prices were already adding to inflation and could affect food and non-food supply chains in the months ahead.

Separate Worldpanel by Numerator data showed UK like-for-like grocery inflation falling to a one-year low of 3.8% in the four weeks to 19 April, from 4.3% a month earlier, as supermarkets increased promotions.

Take-home grocery sales rose 0.9%, while spending on promoted items jumped 7.8% and spending on full-price goods eased 0.2%.

Fraser McKevitt, head of retail and consumer insight at Worldpanel, said concerns about the Middle East conflict's impact on everyday prices were "front of mind for British households", with shoppers increasingly turning to special offers.

Lidl reached a record market share of 8.4% after sales rose 8.8% in the 12 weeks to 19 April, while Ocado sales jumped 11.3% and its market share stood at 2.2%.

Tesco, with a 28.1% market share, grew sales by 4.3%, while Sainsbury's sales rose 4.5% and its market share reached 15.5%.

Sales fell 2.4% at Asda and 2.2% at Co-op, while Marks & Spencer sales were 7.3% higher year-on-year.

Elsewhere, the Bank of Japan kept its benchmark short-term policy rate at 0.75%, as expected, but sharply raised its inflation outlook because of the Middle East war and higher energy prices.

Three of the nine board members voted to raise rates to 1.0%, the largest dissenting vote since 2016.

The BoJ now expected core inflation, excluding fresh food, to reach 2.8% in the year to March 2027, up from its January forecast of 1.9%, and warned that higher crude prices would weigh on corporate profits and households' real incomes.

Rudolph said the BOJ decision added to pressure on markets.

"Rising yields following the Bank of Japan's raised inflation forecast - while keeping rates on hold - led to a sell-off in precious metals such as silver and gold, the latter hitting a one-month low.

"Eurozone inflation expectations spiked while in the UK 10-year gilt yields climbed to around 5% - close to their 2008 highs - on rising inflation fears driven by Middle East tensions and elevated oil prices, reinforcing expectations of tighter Bank of England policy despite an expected near-term rate hold."

Energy plays manage gains, Barclays in the red

In equity markets, energy stocks gained as crude prices climbed.

BP rose 0.28% after reporting better-than-expected first-quarter underlying replacement cost profit of $3.2bn, up from $1.4bn a year earlier and $1.5bn in the previous quarter, helped by surging oil and gas prices, an "exceptional" oil trading contribution and stronger midstream performance.

Analysts had expected $2.6bn.

Among BP's peers, Shell added 0.89%, Repsol advanced 2.12% and Eni gained 1.78%.

Norwegian Air Shuttle rose 5.85% after narrowing its quarterly losses and reporting a record first-quarter load factor, helped by cost control and robust operational performance in an uncertain macroeconomic environment.

Novartis reversed earlier losses to close 0.56% higher despite first-quarter operating profit and sales falling short of analysts' expectations.

On the downside, Barclays fell 3.14% after credit impairment charges rose to �823m in the first quarter from �643m a year earlier, offsetting a 6% increase in revenue and a 3% rise in pre-tax profit.

Bayer dropped 4.83% after the German biotechnology group went before the US Supreme Court in a bid to end thousands of lawsuits linked to Roundup, the herbicide made by Monsanto, which Bayer acquired for $63bn in 2018.

Reporting by Josh White for Sharecast.com.