European Markets Bounce Back Despite Middle East Tensions
European stocks started Friday on a positive note, reversing some of the week's earlier declines. The regional Stoxx 600 index rose 0.5%, Germany's DAX gained 0.75%, and the UK's FTSE 100 nudged up 0.33%. Most sectors were in the green, led by the travel industry, which surged 1.2%, while oil and gas sectors saw a slight dip of 0.6%.
UK Retail Sales Experience Sharp Decline in May
UK retail sales fell unexpectedly by 2.7% in May, marking the steepest monthly drop since December 2023. This ended a positive run of four consecutive months of growth—the longest streak since 2020. The sudden reduction contrasts sharply with economists’ forecasts that anticipated only a 0.5% decrease.
Factors contributing to this decline include weakening consumer spending on food, clothing, and household goods. Experts highlighted ongoing challenges such as geopolitical tensions in the Middle East, uncertainty around US tariffs, and the Bank of England's decision to hold interest rates steady, all dampening consumer confidence.
UK Public Borrowing Rises Slightly Amid Economic Strains
The UK Office for National Statistics reported that public borrowing increased to £17.7 billion ($23.8 billion) in May, marking a £700 million rise compared to the previous year. However, borrowing for day-to-day public sector activities dropped by £1.7 billion to £12.8 billion.
Net public sector debt, excluding banks, was estimated at 96.4% of GDP, up half a percentage point from a year ago. Economic analysts warn that weak growth, rising borrowing costs, and policy reversals could push total borrowing for the 2025-26 fiscal year towards or beyond £150 billion, exceeding official forecasts and tightening the government's fiscal options.
Eutelsat Soars on Government-Backed Capital Raise
The European satellite operator Eutelsat's shares surged by 11% in early London trading after announcing a €1.35 billion ($1.55 billion) capital raise supported by the French government and other investors. This funding, combined with a debt refinancing plan, aims to boost investment in its existing Low Earth Orbit (LEO) satellite network.
Eutelsat emphasized its strategic importance as the only European operator with a fully operational LEO system, underpinning critical services such as military communications, cyber resilience, and secure government connectivity aligned with EU and NATO objectives. The French president hailed this move as reinforcing France’s and Europe's strategic independence, with further investors, including the UK, potentially joining later.
Gold Prices Slide Amid Market Dynamics
Spot gold prices dipped by 0.45% to around $3,355 per ounce as of midday Singapore time, facing a mild weekly decline. Despite this drop, gold remains up by more than 31% since the beginning of the year, maintaining its reputation as a safe haven amid ongoing political and economic uncertainties.
European Indices Poised for Slight Gains
Looking ahead, key European indices are projected to open higher. The UK’s FTSE 100 is expected to gain around 34 points, while France’s CAC 40 and Germany’s DAX are forecast to climb 51.5 and 171 points respectively. After a week packed with central bank policy decisions, markets seem to be stabilizing, although geopolitical tensions continue to dominate investor focus.
