May 21 - European equities eased on Thursday as investors adopted a cautious stance while awaiting further information from U.S.-Iran peace discussions. Iran reported it was reviewing Washington's latest overture aimed at ending the conflict. U.S. President Donald Trump said he would be prepared to wait to "get the right answers" from Tehran, but cautioned that attacks would resume if no agreement emerged.
The broad-based STOXX 600 index slipped 0.2% to 618.79 points as of 0701 GMT, easing off gains registered the previous session when the index finished about 1.5% higher near two-week highs. Despite intermittent rallies in global stock markets, European shares have not recovered to pre-war levels. Analysts and market participants point to the region's reliance on oil imports and its relatively modest exposure to AI technology as factors limiting a stronger rebound.
Market sources indicated that the case for a European Central Bank rate hike at the June meeting is nearly sealed, although the bank is expected to remain noncommittal about any further tightening steps. Money markets are pricing in more than two additional rate increases from the ECB before the end of the year.
Among early movers in European trading, EasyJet shares dropped 1.8% after the British low-cost carrier reported a first-half loss and said that its full-year outlook is uncertain in light of the Iran war. The airline's results and guidance contributed to sector-specific pressure on travel and leisure stocks.
Investors are weighing geopolitical developments alongside central bank signalling, with oil import dependence and technology-sector composition cited as constraints on Europe's stock-market recovery. The confluence of diplomatic uncertainty, potential ECB tightening, and company-level earnings developments left markets subdued on the session.
Market context
- Geopolitical negotiations between the U.S. and Iran remain a focal point for investors.
- ECB rate expectations have shifted toward a higher likelihood of a June hike, while the subsequent path is less certain.
- Company-specific news, notably EasyJet's first-half loss, is applying pressure on sector performance.