Eurozone investor sentiment on the rise

• Mixed start in Europe as US-China trade talks dominate.
• UK jobs report shows higher unemployment and declining wage growth.
• Eurozone investor sentiment on the rise.

A mixed start in Europe today, with the FTSE 100 outperforming amid a weaker job support that could lift hopes of a more dovish stance from the Bank of England going forward. However, the dominant theme with which markets will focus on today will be the second day of trade negotiations between the US and China, taking place in London. Those talks are focused on gaining access to Chinese rare earth minerals, highlighting that the Chinese decision to restrict exports has clearly had a tangible impact on US businesses. Despite Trump’s attempts to bring manufacturing back to the US, the reliance on rare earth materials from China highlights the fact that we could see US production restricted unless Trump holds a positive relationship with his Chinese counterparts. With equity markets closing in on record highs, a breakthrough in trade talks between the worlds to largest economies could provide the basis for that next leg higher. However, it is notable that these targeted talks are unlikely to further drive down the tariff rate currently in place between the US and China.

The latest UK jobs report made for concerning reading for those at Threadneedle Street, with a rising unemployment accompanied by a bump higher in the claimant count figure. Notably, these signs of economic weakness have been accompanied by a decline in the wage grow figure, helping to ease inflation concerns. Markets are now expecting another two rate cuts by year end at the Bank of England, although even a second cut would maintain a slow pace of easing that leaves UK rates significantly higher than most developed economies.

This morning saw a welcome rise in the eurozone Sentix investor confidence survey, pushing to the highest level since June 2024. Set against a backdrop of European stock-market gains that have seen habitual record highs for the DAX, it comes as no surprise to see particular strength in the German metrics. At -5.9 points, the German index stands at its highest level since March 2022, with particular strength for expectations (+12 points) and current situation (fourth consecutive rise).