FRANKFURT: European shares ticked lower on Monday, as investors refrained from making big bets ahead of an eventful week packed with tariff negotiations and ending with talks between the US and Russia on the war in Ukraine.
The pan-European STOXX 600 index closed 0.1% lower, retreating from gains earlier in the day, but still hovering near its highest level since July 31.
Investors will be bracing for the summit on Friday in Alaska, where Kyiv fears Russian President Vladimir Putin and US President Donald Trump may try to dictate terms for ending the 3-1/2-year war.
A German government spokesperson said, however, that European leaders will
hold a virtual meeting with Trump ahead of the summit, after they backed Ukrainian President Volodymyr Zelenskiy to take part in the talks.
Hopes of a peace deal weighed on German defence companies, with Rheinmetall dropping 4.6%, while Renk fell 1.6%.
Germany’s benchmark index slipped 0.4%, while the broader aerospace and defence index was off 1.1%, after hitting an over one-month low in the session.
“The provision of defence equipment has largely shifted over the last few months, Europe is now providing a lot more of the defence to Ukraine,” said Craig Cameron, portfolio manager and research analyst at Templeton Global Equity Group, on the impact of a potential peace deal on European defence firms.
A 29.6% plunge in Danish wind farm developer Orsted after it unveiled a 60-billion-crown ($9.4 billion) rights issue also weighed on stocks.
The stock hit a record low and was the biggest decliner on the STOXX 600.
Meanwhile, the August 12 deadline for a deal between the US and China looms, with markets expecting a deadline extension and a deal that would avoid imposing triple-digit tariffs on each other’s goods.
Despite concerns about Trump’s tariffs, a strong US earnings season driven by AI optimism, and expectations of interest rate cuts from the US Federal Reserve have pushed US stocks to record highs, dimming the appeal of European equities that were outperforming US peers in the first half of the year.
“The story (has) shifted back to, in particular, the US as tariff deals were negotiated lower and companies like Nvidia and Microsoft have really driven the market higher,” said Cameron.
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