By Sruthi Shankar
(Reuters) -European shares were broadly flat on Monday, as investors refrained from making big bets ahead of a key U.S. inflation data, tariff negotiations and talks between the U.S. and Russia on the war in Ukraine.
The pan-European STOXX 600 index was up 0.01% as of 0920 GMT, retreating from opening gains of as much as 0.4% and hovering near its strongest level since July 31.
Ukrainian President Volodymyr Zelenskiy won diplomatic backing from Europe and the NATO alliance ahead of the Russia-U.S. summit this week in Alaska on Friday, where Kyiv fears Russian President Vladimir Putin and U.S. President Donald Trump may try to dictate terms for ending the 3-1/2-year war.
Trump said a potential deal would involve “some swapping of territories to the betterment of both (sides).”
Hopes of a peace deal weighed on German defence companies. Shares of Rheinmetall dropped 4.7%, while those in Renk and Hensoldt were down 3.3% and 1.3%, respectively.
Further weighing on European stocks was a 28% plunge in Orsted after the Danish wind farm developer unveiled a 60-billion-crown ($9.4 billion) rights issue, citing adverse developments in the U.S. offshore wind market.
Despite concerns about Trump’s tariffs, a strong U.S. earnings season, driven by optimism about AI, and expectations of interest rate cuts from the U.S. Federal Reserve have pushed U.S. stocks to record highs. Europe’s STOXX 600 remains about 3% away from its March record high.
“We’re in a slightly odd and probably unstable equilibrium at the moment where everything feels a little bit (like) Goldilocks,” said Legal & General global equity strategist Robert Griffiths, pointing to the limited impact of tariffs on inflation and companies’ margins so far.
“But that probably isn’t an equilibrium. Answering the question, who’s paying the tariffs, is going to be critical for determining how good or bad that second-half proves for markets.”
Meanwhile, the August 12 deadline for a deal between the U.S. and China looms. Analysts said investors were expecting an extension of the deadline, with both sides seeking to close a deal that would avoid imposing triple-digit tariffs on each other’s goods.
Among other stocks, Northern Data dropped 11.2% after U.S. video platform and cloud services provider Rumble said it was considering an offer of about $1.17 billion for the German AI cloud group.
Novartis climbed 2.3% after the Swiss pharmaceutical company said its Sjogren’s disease treatment, Ianalumab, met the primary endpoint in a late-stage trial.
(Reporting by Sruthi Shankar in Bengaluru; Editing by Sherry Jacob-Phillips and Harikrishnan Nair)
