European stocks little changed but poised for monthly gain

Both the STOXX 50 and STOXX 600 fluctuated near the flatline on the final trading day of May, with investors adopting a cautious stance amid renewed uncertainty surrounding global trade tensions.

European stocks little changed but poised for monthly gain

The subdued session came as markets reacted to a key legal development in the U.S., where a federal appeals court temporarily reinstated tariffs previously imposed by former President Donald Trump. This decision effectively reversed a ruling just a day earlier by a trade court that had deemed the tariffs an overreach of executive authority, adding another layer of volatility to the already fragile trade landscape. Compounding market jitters, U.S. Treasury Secretary Scott Bessent acknowledged that trade negotiations with China were “a bit stalled,” suggesting that a breakthrough may require intervention at the presidential level from both the U.S. and Chinese leadership. These remarks underscored the lack of progress in talks and fueled concerns that the trade impasse could persist into the second half of the year, posing headwinds for global growth and corporate earnings. Sector performance across European markets was mixed. Real estate stocks outperformed, likely buoyed by declining bond yields and easing inflation expectations, which support the valuation of income-generating assets. In contrast, mining and technology shares lagged behind, weighed down by concerns over slowing Chinese demand and renewed scrutiny of cross-border tech flows amid geopolitical tensions. The weakness in miners also reflected softer commodity prices and uncertainty over global industrial output.

Corporate news

On the corporate front, pharmaceutical giant Sanofi saw its shares tumble more than 5%, making it one of the session’s notable underperformers. The decline followed investor concerns tied to disappointing trial data for one of its key drug candidates and reports of potential regulatory hurdles in the U.S. and EU. The sharp drop in Sanofi’s stock weighed on the broader healthcare segment, contributing to the index’s lackluster tone. Despite Friday’s muted performance, both major European benchmarks—the STOXX 50 and STOXX 600—are set to close the month with robust gains of around 4%, marking their strongest monthly advance since January. The rally was fueled earlier in the month by improved earnings sentiment, easing inflationary pressures across the eurozone, and growing conviction that the European Central Bank will begin cutting interest rates as early as June. Investors will now be closely watching macroeconomic data and central bank communications in the weeks ahead to gauge the sustainability of the recent gains.