(Sharecast News) - European markets were cautious on Monday after the US and Iran agreed to stand down following tit-for-tat missile strikes over the weekend.
The pan-European Stoxx 600 edged up 0.09% to 636.44.
Germany's DAX slipped 0.14% to 24,636.16, France's CAC 40 fell 0.21% to 8,367.33, and London's FTSE 100 declined 0.23% to 10,484.22.
Brent crude futures were last up 1.42% on ICE at $73.01 per barrel, while the NYMEX quote for West Texas Intermediate gained 1.95% to $70.58.
Dan Coatsworth, head of markets at AJ Bell, said investors were unsure whether to be bullish or bearish after another setback in the Middle East peace process.
"Reports from the US implied everything would be sorted out after a weekend of renewed fighting, but investors are getting tired of hearing the same thing without results," he said.
Tensions flared again after Iran fired at an oil tanker in the Strait of Hormuz, prompting US strikes on Iranian installations before Tehran launched drone and missile attacks against Bahrain and Kuwait on Sunday.
Both sides are supposed to be at the start of a 60-day negotiation period towards a ceasefire.
Chris Beauchamp, chief market analyst at IG, said it had been "another mixed day" for the FTSE 100, with the wider equity rally looking tired and unable to generate much enthusiasm despite signs that Washington and Tehran could resume talks.
"It hasn't been a very exciting start to the week on the continent either, with the equity rally looking distinctly tired and unable to muster up much enthusiasm even as the US and Iran look to resume talks," he said.
Euro area economic sentiment improves
On the economic front, eurozone economic sentiment improved in June, although employment intentions remained under pressure.
The European Commission said its economic sentiment indicator rose 1.3 points to 95.0, beating expectations for 94.3.
The gauge also rose by the same amount across the wider EU, to 95.1.
The improvement was seen across all sectors apart from construction, while consumer confidence rebounded 1.2 points after a sharp fall in March and April, when hostilities in the Middle East were at their peak.
Sentiment rose by 1.7 points in Germany, 1.3 points in Italy and 0.7 points in Spain, but dipped 0.2 points in France.
The Netherlands recorded the biggest gain, with sentiment up 4.1 points.
However, the eurozone's employment expectations indicator fell markedly, losing 2.3 points to 92.9 as retail, services and construction firms cut hiring plans.
Bert Colijn, chief economist for the Netherlands at ING, said Europe's worries had shifted from fuel shortages to extreme heat, while business and consumer sentiment was cautiously improving.
He said the European Central Bank would need to judge how much confidence to place in the fragile US-Iran deal, given that inflation pressures could return quickly if the agreement falters.
In the UK, private sector firms expect activity to decline over the next three months, according to the Confederation of British Industry's latest Growth Indicator.
The CBI said firms expect activity to fall in the three months to September, with a weighted balance of -28%, marginally weaker than in May and extending the run of negative expectations that began in late 2024.
Distribution firms were the most downbeat, with an expectations balance of -44%, followed by manufacturing at -31% and business and professional services at -26%.
Consumer services firms expected only a slight decline, at -5%, their least pessimistic outlook since August 2024.
The survey also showed private sector activity contracted in the three months to June, with an overall balance of -34%, as all major sectors reported falling activity.
Business volumes in services fell by -34%, while hiring intentions remained negative at -26%.
Selling price expectations eased for a second consecutive month to +11%, returning to around their historical average.
Alpesh Paleja, the CBI's deputy chief economist, said the June surveys showed an economy that remained "soft, cautious and under pressure", with weak demand, fragile confidence and persistent cost pressures still dominating the business landscape.
He said there were isolated pockets of resilience, particularly in aerospace and some services niches, but little sign of a sustained improvement in underlying activity.
UK mortgage approvals fell in May to their lowest level since December 2023, according to the Bank of England.
Approvals declined to 56,200 from 66,000 in April, below the six-month average of 63,300.
Remortgage approvals with a different lender fell to 33,300 from 51,200.
Net borrowing of mortgage debt dropped to 2.9bn from 4.4bn, while the effective interest rate on newly drawn mortgages rose to 4.22% from 4.08%.
Net consumer credit borrowing was broadly unchanged at 1.7bn, with credit card borrowing falling to 0.6bn from 0.8bn and other consumer credit rising to 1.1bn from 0.9bn.
Household deposits with banks and building societies increased by 5.4bn, following net deposits of 5.7bn in April.
The Bank said households deposited an additional 3.1bn into ISAs and 1.3bn into interest-bearing time accounts.
Bridgepoint surges, BAT slips on restructuring plans
In equity markets, Bridgepoint surged 16.08% after the UK buyout group announced a $1.4bn deal to acquire the real estate business of US investment firm Kayne Anderson.
Prosus rose 2.43% after the Dutch technology investor reported an 84% jump in full-year adjusted core profit.
Annual revenues reached $9.7bn in the year to 31 March, while group adjusted EBITDA came in at $1.1bn.
British American Tobacco slipped 0.99% after announcing plans to cut 5,500 roles as part of a restructuring programme aimed at delivering 600m in cost savings by 2028. The company said a further 3,500 roles would be shifted to strategic partners under its Fit2Win programme.
Reporting by Josh White for Sharecast.com.
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