European stock markets, STOXX 600, FTSE 100, CAC 40 and DAX

Yields on government bonds ticked lower across the board in Europe on Tuesday morning, as investors continued to digest U.S. President Donald Trump’s pause on 50% tariffs on the European Union.

The yield on German 10-year bunds, seen as a benchmark for the euro zone, was 4 basis points lower by 9:30 a.m. in London. The U.K.’s 10-year gilt yield dropped 4 basis points, while French 10-year government bond yields were also down by 4 basis points. Italian 10-year bond yields dipped 2 basis points, as their Swiss counterparts moved 4 basis point lower.

Bond yields and prices move in opposite directions — so a rise in demand can push prices higher and yields lower.

Regional government bonds with shorter and longer maturity periods also moved lower, with long-dated U.K. bonds — known as gilts — seeing the biggest movements. Yields on 20- and 30-year gilts edged 7 basis points lower.

In a note to clients on Tuesday, Deutsche Bank’s Jim Reid argued that markets were becoming “more accustomed to Trump’s threats and now partly assume the full threat won’t immediately materialize.”

“Interestingly the dollar hasn’t rallied since the news on Friday and has instead edged lower. Investors are seemingly of the view that continued aggressive tariff headlines chip away at investors desire to hold US assets,” Reid said. 

— Chloe Taylor

Provisional data from Insee, France’s statistics office, pointed to annual harmonized inflation increasing by 0.6% in May.

It marked a slowdown from April, when French inflation rose by 0.9% on an annual basis.

Slowing inflation could be attributed to a decline in the price of services, Insee said as it released the data on Tuesday, alongside contracting energy costs. Food prices were bucking the trend and increasing in France.

— Chloe Taylor

European stock markets have broadly risen in the first 15 minutes of the trading day.

The Stoxx Europe 600 index opened 0.2% higher, while the FTSE 100 posted a gain of 0.8%.

Meanwhile, France’s CAC 40 declined by 0.2% and Germany’s DAX held steady.

— Ganesh Rao

German consumer sentiment improved in May, the GfK Consumer Climate report showed on Tuesday, but U.S. tariffs policies were found to be dampening willingness to spend.

The report marked the third consecutive month in which the index moved higher, driven in part by slowing inflation and “good wage settlements” — but despite the improvement, sentiment remained low and consumers were hesitant to make discretionary purchases, analysts said.

“The unpredictable customs and trade policy of the US government, turbulence on the stock markets and fears of a third consecutive year of stagnation are reasons why the consumer climate remains weak,” Rolf Bürkl, consumer expert at the NIM, said in a statement on Tuesday. “In view of the general economic situation, people seem to think it advisable to save.”

The GfK Consumer Climate, which surveyed around 2,000 German consumers between May 1 and May 12, was jointly published by NIQ and the Nuremberg Institute for Market Decisions.

— Chloe Taylor

Diving deeper into the British Retail Consortium’s inflation data, it appears that some U.K. retailers may be strategically lowering prices in a bid to get ahead of looming U.S. tariffs.

“Non-food prices remained in deflation, but this slowed in categories such as fashion and furniture as retailers began to unwind heavy promotional activity,” BRC chief Helen Dickinson said in a statement on Tuesday. “Prices were falling faster for electricals as retailers tried to encourage spending before any potential knock-on impact from U.S. tariffs.”

In the non-food category, prices contracted by 1.5% year on year in May, the BRC’s data showed.

U.S. President Donald Trump recently threatened a 25% tariff on Apple in a bid to force the tech giant into moving production into the United States — a move that some have cautioned would drastically raise prices of the company’s products. Last month, the U.K. and the U.S. agreed on the framework for a trade deal — but uncertainties remain around how the Trump administration’s tariffs policies will affect wider supply chains.

— Chloe Taylor

Food inflation in the…