European Stocks Cautious to Kick Off June

European stocks started June on a weaker footing, with both the STOXX 50 and STOXX 600 slipping around 0.1%. Investor sentiment remained fragile amid ongoing geopolitical tensions in the Middle East, as the absence of a longer-term agreement between the US and Iran to end hostilities and fully reopen the Strait of Hormuz continued to fuel uncertainty. Over the weekend, the US said it had struck Iranian military sites, while Iran's Revolutionary Guards claimed they had targeted US interests in retaliation. Among individual stocks, Unilever (-1.0%), Airbus (-1.3%), Safran (-1.4%), and Intesa Sanpaolo (-0.8%) were down. In contrast, SAP (+2.0%) and Schneider Electric (+2.6%) outperformed, and the tech sector touched 2020-highs after the SoftBank Group pledged to invest €45 billion in France over the next five years to build AI infrastructure. Elsewhere, EasyJet surged more than 11% after stating that it had not received any takeover approach from Castlelake.

European equity markets were on track for a lower open on Monday as the lack of a longer-term agreement between the US and Iran to end hostilities and fully reopen the Strait of Hormuz kept investors on edge. Meanwhile, European Central Bank board member Isabel Schnabel warned that the growing adoption of stablecoins, most of which are tied to the US dollar, could weaken the euro’s role and reduce some countries’ control over monetary policy. She also reiterated comments from last week suggesting that the ECB should consider raising interest rates this month even if a US-Iran peace agreement is reached. In premarket trading, Euro Stoxx 50 and Stoxx 600 futures were both down about 0.3%, pointing to a softer start for European markets.

European stocks closed higher on Friday amid softer than expected inflation data, while markets continued to gauge the likelihood of a deal in Iran. The Euro STOXX 50 added 0.3% to 6,065 and the STOXX Europe 600 inched 0.2% higher to 626.5. US President Trump's final approval was still pending following reports that the US and Iran agreed to a memorandum that would pave the way to restore tanker flows from the Strait of Hormuz, lowering energy prices and sovereign yields this week. Additionally, EU-harmonized inflation rates were lower than expected in Germany and France, raising hopes that the ECB will deliver multiple rate hikes this year. Banks closed higher following a volatile week, with BBVA, UniCredit, and BNP Paribas adding around 1.5%. In turn, SAP jumped 2.4% on a rebound for US software firms. Meanwhile, AstraZeneca rose 1% after receiving US approval for a bladder cancer treatment. The Euro STOXX 600 added 0.6% this week and the STOXX Europe 600 edged 0.2 higher.