European stocks weaken as manufacturing PMI results disappoint

Investing.com - European stock markets edged lower Tuesday, with uncertainty surrounding U.S. debt ceiling negotiations weighing as well as disappointing European manufacturing sector surveys.

At 03:30 ET (07:30 GMT), the DAX futures contract in Germany traded 0.2% lower, CAC 40 futures in France traded 0.4% lower and the FTSE 100 futures contract in the U.K. fell 0.2%.

Data released Tuesday showed that the French manufacturing sector remained in the doldrums, while its services PMI release slipped from April's levels while remaining in expansionary territory.

Sentiment in the important German manufacturing sector also retreated in May, with its PMI falling to 42.9 from 44.5, but a strong services result helped its composite PMI rise.

Better-than-expected PMI surveys helped boost sentiment in April, but that confidence is draining away as the European Central Bank continues its fight against inflation with further monetary tightening likely.

The ECB still needs to raise its interest rates further to bring inflation down to its medium-term goal of 2%, ECB policymaker Pablo Hernández de Cos said on Monday.

Also weighing, U.S. President Joe Biden and House Speaker Kevin McCarthy ended discussions late Monday with no agreement on how to raise the U.S. government's $31.4 trillion debt ceiling.

Some hints of progress emerged from the talks, with McCarthy saying the meeting was “productive”, but there are less than two weeks before a possible first-ever U.S. government default that would roil the financial markets and likely lead to a global recession.

The European earnings season is coming to a close, but Julius Baer (SIX:BAER) stock fell 8% after the Swiss wealth manager managed to report only modest money inflows after a slow start to the year, struggling to take advantage of UBS’s (SIX:UBSG) takeover of troubled rival Credit Suisse (SIX:CSGN) earlier this year.

Oil prices stabilized Tuesday, with the debt ceiling uncertainty hitting risk sentiment even as the U.S. driving season draws nearer.

U.S. fuel consumption is set to pick up with the start of the summer season, which is usually marked by the Memorial Day weekend. This, coupled with disruptions in Canadian supply due to wildfires in the oil-rich Alberta province, pointed to tighter oil markets in the coming months.

By 03:30 ET, U.S. crude futures traded largely flat at $72.06 a barrel, while the Brent contract was flat at $76.00.

Additionally, gold futures fell 0.9% to $1,958.95/oz, while EUR/USD traded 0.2% lower at 1.0794.