(Sharecast News) - European shares closed higher on Thursday as investors focused on the US-China summit and continuing political turmoil in the UK, while oil prices eased.
The pan-European Stoxx 600 rose 0.69% to 615.66.
Germany's DAX gained 1.31% to 24,452.62, France's CAC 40 advanced 0.93% to 8,082.27, and London's FTSE 100 added 0.46% to 10,372.93.
Brent crude futures were last down 0.76% on ICE at $104.83 per barrel, while the NYMEX quote for West Texas Intermediate was 0.06% lower at $100.96.
"So long as the AI mania persists, and US earnings remain at their impressive level, it seems unlikely that markets will begin to worry about rising yields and surging energy costs," said Chris Beauchamp, chief market analyst at IG.
"So long as the music keeps playing investors will have to chase the moves in equity markets, continuing the feedback loop that has driven such a rapid recovery.
"It is never wise to stand in the way of an oncoming train, and for now luck is running with the bulls."
In the UK, prime minister Keir Starmer was waiting to see whether now-former health secretary Wes Streeting would launch a leadership challenge.
Streeting tendered his resignation to Number 10 late in the day, although a challenge had yet to be launched.
In Beijing, US president Donald Trump was set to meet his Chinese counterpart Xi Jinping, with trade and the Iran war expected to dominate talks.
Patrick Munnelly, market strategy partner at TickMill, said the FTSE 100 had "traded with a firmer tone", but that "the real story sat in UK macro risk rather than the index print".
"Sterling slipped after health minister Wes Streeting resigned, deepening the political pressure on Keir Starmer after Labour's poor local-election showing," he said.
"GBP-USD briefly fell to $1.3502, while EUR-GBP edged higher to 86.68p.
"The equity market took the headline risk in stride, but FX was less forgiving: the currency is now pricing in political instability first."
UK economy grows in first quarter
On the economic front, the UK economy grew in the first quarter despite the outbreak of war in the Middle East.
The Office for National Statistics said GDP rose 0.6% between January and March, in line with consensus, after a revised 0.2% increase in the fourth quarter.
Services expanded 0.8%, led by wholesale, computer programming and advertising, while construction returned to growth with a 0.4% rise and production edged up 0.2%.
On a monthly basis, GDP grew 0.3% in March after downwardly revised growth of 0.4% in February, beating expectations for a 0.2% decline.
Construction output rose 1.5%, supported by gains in new work and repair and maintenance.
GDP per capita rose 0.6% in the first quarter and was up 0.9% year-on-year.
Ben Jones, senior lead economist at the Confederation of British Industry, said the first-quarter rebound looked "unusually strong" and was unlikely to be sustained as the effects of the Iran conflict feed through.
Derren Nathan, head of equity research at Hargreaves Lansdown, said the figure was the strongest G7 print so far, but noted that the period captured only one month of the Iran conflict and that growth was expected to slow this quarter.
ING's James Smith said the data may also reflect seasonal adjustment issues, noting that UK first-quarter growth has repeatedly been stronger than later quarters since 2022.
Munnelly said the macro data had given equity bulls "some cover".
"UK GDP surprised positively in March, rounding off a stronger first quarter and challenging the gloom around the domestic economy.
"But investors are reluctant to extrapolate. Economists warned that there could be inventory effects, as firms might start working faster before supply-chain disruptions and higher input costs caused by tensions in the Middle East."
UK house prices faltered in April as higher mortgage rates and geopolitical uncertainty weighed on the market, according to the Royal Institution of Chartered Surveyors.
The headline house price balance fell to -34 from -25 in March, while new buyer enquiries remained negative at -34 and agreed sales weakened to -36.
New instructions slipped to -3, and appraisals fell to -16 from zero, pointing to a weaker pipeline of future listings.
Tarrant Parsons, head of market research and analysis at RICS, said the housing market remained "in the grip of macro headwinds stemming from the Middle East conflict".
He said warnings from the Bank of England that rate rises may be needed to tackle renewed inflation underlined the difficult backdrop for buyers, adding that activity and sentiment were likely to remain subdued until there was a clearer path for inflation and borrowing costs.
In the US, initial jobless claims rose by 12,000 to 211,000 in the week ended 9 May, above expectations for 205,000.
Continuing claims increased by 24,000 to 1.78m, slightly below forecasts, while the four-week moving average rose to 203,750.
US retail sales rose 0.5% month-on-month in April, matching expectations but slowing from a downwardly revised 1.6% increase in March.
Sales at gasoline stations rose 2.8% as fuel prices climbed, while sales excluding gas stations increased 0.3%.
The control group, which feeds into GDP calculations, rose 0.5%, slightly ahead of expectations for 0.4%.
"So far the Trump-Xi love-in hasn't produced any big news," Beauchamp said.
"But we can be sure that the Americans have been pushing for China to lean on its ally.
"Both WTI and Brent continue to make themselves comfortable above $100, a sign that inflation is becoming embedded across the economy.
"Given the total absence of any progress on even beginning to talk, it seems more and more likely that oil prices will resume their ascent soon."
Action owner 3i in the red, Telefonica among the gainers
In equity markets, 3i Group plunged 14.75% after warning of slowing sales at discount retailer Action.
On the upside, Telefonica rose 5.79% after results, while Legal & General gained 6.16% after chief executive Antonio Simoes dismissed speculation about a potential sale of the company.
Reporting by Josh White for Sharecast.com.
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