(Sharecast News) - European shares closed firmly higher on Tuesday as investors monitored nuclear talks between the US and Iran in Geneva and digested a raft of economic data from Germany and the UK.
Sentiment was also shaped by reports that Washington had dispatched the USS Gerald R Ford, the world's largest warship, to the Middle East as part of a growing military buildup since Tehran's crackdown on anti-regime protests.
The pan-European Stoxx 600 rose 0.45% to 621.29, with Germany's DAX up 0.8% at 24,998.40, France's CAC 40 gaining 0.54% to 8,361.46 and the FTSE 100 advancing 0.79% to 10,556.17.
"Selling US tech and buying UK utilities and healthcare has become this year's hot trade, and the trend was firmly in motion on Tuesday," said Dan Coatsworth, head of markets at AJ Bell.
"The FTSE 100 moved higher while the Nasdaq fell back, with the gap continuing to widen between UK and US markets in 2026.
"London's blue-chip index enjoyed another solid session as healthcare heavyweights AstraZeneca and GSK injected the UK market with decent gains.
"Consumer staples group Unilever, vaping-to-cigarettes provider British American Tobacco, and headache tablets expert Haleon also provided ballast.
"It was clear investors preferred stodgy companies that churn out profits with no drama, rather than the once-electrifying area of tech that's become a hotbed for worry about overspending on AI."
Following a long weekend, US investors played it cool amid ongoing technology and software sector concerns which dragged indices down, added Axel Rudolph, chief technical analyst at IG.
"The US 10-year yield slipped to 4.02% - to its lowest since early December - and stocks declined further as last week's softer inflation data kept June Fed-cut expectations alive despite stronger payrolls, with markets pricing around 62 basis points of easing this year ahead of Fed minutes, GDP and core PCE data," he said.
"European stock indices regained some of Monday's losses despite German economic sentiment coming in weaker than expected and the UK unemployment rate nearly rising to a five-year high."
German inflation edges higher in January
In economic news, German inflation edged up to 2.1% year-on-year in January, confirming preliminary estimates, while the harmonised rate stood at 2%.
Consumer prices rose 0.1% month-on-month.
"The rise in overall consumer prices intensified at the start of the year," said Destatis president Ruth Brand.
"In particular, the price of food increased more in January than in the previous months.
"In the months from September to December 2025, the price increase observed for food was still lower than overall inflation."
Food prices rose 2.1% annually, with sugar, jam, honey and confectionery up 10.9%, including a 21% jump in chocolate, while fruit and meat also recorded notable increases.
Services prices climbed 3.2% on the year, particularly in social facilities and passenger transport, while energy prices fell 1.7%, with household energy down 3.2% and electricity costs 3.2% lower.
Investor confidence in Germany meanwhile eased unexpectedly in February.
The ZEW Economic Sentiment Index slipped to 58.3 from January's 59.6, missing expectations of 65, though remaining near a four-year high.
"The ZEW Indicator remains stable - the German economy has entered a phase of recovery, albeit a fragile one," said ZEW president Achim Wambach.
"There are still considerable structural challenges, especially for industry and private investment.
"The impending reforms of the system of social insurance should be used to significantly enhance Germany's attractiveness as a business location."
Export-oriented sectors such as chemicals, pharmaceuticals, steel, metals and mechanical engineering improved, while banks, insurers and IT weakened.
In the UK, the unemployment rate rose to 5.2% in the three months to December from 5.1%, the highest since the first quarter of 2021, while basic pay growth excluding bonuses slowed to 4.2% from 4.4%.
Total earnings including bonuses also rose 4.2%, down from 4.6%.
Payrolled employees fell by 121,000 over the year to December and by 6,000 on the month, with a further annual decline of 134,000 in the early January estimate, leaving the total at 30.3 million.
Separate data showed company insolvencies in England and Wales rose 4% month-on-month to 1,744 in January, though they were 14% lower than a year earlier.
Creditors' voluntary liquidations totalled 1,323, up 1% on the month but down 17% year-on-year.
Compulsory liquidations increased 4% to 256, while company voluntary arrangements fell 13% to 13.
Administrations jumped 41% to 151, up 14% on the year.#
In the US, manufacturing growth in New York eased slightly but remained in expansion.
The Empire State index fell to 7.1 in February from 7.7, ahead of expectations of 6.
New orders dipped to 5.8 and shipments fell to -1.0 from 16.3, while unfilled orders rose to 9.1 and delivery times to 4.0. The future business conditions index climbed to 34.7 from 30.3.
DKSH in the green, Antofagasta slides
In equities, BHP edged 0.04% higher after reporting a sharp rise in first-half earnings and lifting its dividend by 46%, reflecting stronger copper exposure.
InterContinental Hotels Group gained 0.97% after posting higher full-year operating profit and revenue and announcing a $950m share buyback.
DKSH surged 7.31% after increasing full-year profits.
On the downside, Antofagasta fell 6.49% despite reporting strong full-year top-line growth and record underlying earnings, with Coatsworth noting: "Antofagasta might be swimming in profits thanks to a red-hot copper price, but investors often use the publication of results as an excuse to move on".
"Profit taking after a stellar run for the share price since April 2025 pulled down the miner."
Plus500 dropped 4.75% after senior executives sold 1.5 million shares, equivalent to 2.1%, to Goldman Sachs.
Reporting by Josh White for Sharecast.com.
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