European stock markets started the week on a slightly softer note Monday, with investors showing a bit of caution as they awaited highly anticipated trade talks between China and the United States, set to take place in London.
Hopes are pinned on these discussions to bring an end to the long-running and often contentious trade dispute between the two global economic giants.
Around 03:15 ET (07:15 GMT), the DAX index in Germany had dropped by 0.4%, while the CAC 40 in France slipped 0.1%, and the FTSE 100 in the UK fell by a similar 0.1%.
This slight pullback suggests a wait-and-see approach from market participants ahead of the key diplomatic engagement.
High stakes diplomacy: US and China convene in London
Representatives from the world’s two largest economies are expected to meet in the UK capital later in the session.
This meeting gains added significance as it comes less than a week after a rare, direct phone call between Chinese President Xi Jinping and US President Donald Trump.
President Trump announced on Friday that Treasury Secretary Scott Bessent will lead the US delegation.
China’s foreign ministry, earlier on Monday, confirmed their participation in these high-level trade talks.
Investors are hopeful that these discussions will lead to a more lasting de-escalation in the US-China trade conflict.
This follows a temporary agreement in mid-May where both sides agreed to slash their respective trade tariffs, albeit for a limited period.
There have already been some tentative signs of easing tensions.
For instance, US aerospace giant Boeing (NYSE:BA) has reportedly resumed deliveries of new planes to Chinese customers, after halting them in April when both countries were ramping up tariffs on each other.
Economic backdrop: Chinese trade data underwhelms, European inflation eyed
While the economic data calendar in Europe is relatively light on Monday, recent trade figures from China painted a challenging picture.
Growth in Chinese exports missed expectations, and notably, Chinese exports to the US plunged by over 34% compared to a year ago.
Imports into China also shrank substantially more than analysts had predicted.
Adding to the concerns, Chinese consumer inflation contracted for a fourth consecutive month, although this was slightly less than expected. Producer inflation in China, however, fell more than anticipated.
Looking ahead in Europe, regional inflation data is due at the end of the week.
This will be closely watched, especially after the European Central Bank hinted last week, following its interest rate cut, that it was nearing the end of its current policy easing cycle, suggesting another cut in July was unlikely.
Corporate focus: Tesla remains in the spotlight amid Musk-Trump feud
With the European corporate earnings season largely concluded, individual stock focus is likely to remain on companies sensitive to global sentiment and specific news events.
Tesla (NASDAQ:TSLA) continues to be a point of interest, partly due to the ongoing public feud between its CEO, Elon Musk, and President Trump.
Despite the recent volatility, Morgan Stanley has maintained its “overweight” rating on the electric vehicle manufacturer, seeing a potential upside of nearly 39% from the stock’s closing price on Friday.
Tesla shares had plummeted by nearly 15% last week as both Musk and Trump engaged in personal attacks against each other on social media.
However, Morgan Stanley, in a research note, stated, “while emotions are running high, we are not convinced the longer-term vectors that drive the stock’s value have changed.”
Oil prices ease but hold onto weekly gains
Oil prices slipped lower on Monday morning but managed to retain most of the gains achieved last week.
Traders are closely monitoring for any news emerging from the US-China trade talks in London.
At 03:15 ET, Brent futures slipped 0.5% to $66.14 a barrel, and US West Texas Intermediate crude futures fell 0.4% to $64.30 a barrel.
The prospect of a US-China trade deal has recently boosted some investors’ risk appetite and supported oil prices, based on hopes that a resolution would stimulate economic growth and, consequently, demand for energy.
Brent crude had advanced 4%, and WTI gained over 6% last week, marking their first weekly gain in three weeks.
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