The pan-European STOXX 600 index was up 0.04% at US541.2 points, as of 8.42am.
Other regional indexes were mixed – Germany was down 0.2%, France rose 0.1%, Spain lost 0.8%, and the UK was 0.2% higher.
The ceasefire brokered by US President Donald Trump between Iran and Israel appeared to be holding today.
Trump’s Middle East envoy said late yesterday that talks between the US and Iran were “promising” and that Washington was hopeful for a long-term peace deal.
However, doubts continued to linger about the truce’s stability.
Additionally, Nato leaders gathered in The Hague for a summit today, which is expected to endorse a higher defence spending goal of 5% of GDP – a response to a demand by Trump.
“European stocks still face trade tensions and the ECB’s easing and interest in European defense stocks are now no longer strong factors anymore,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
“That’s why yesterday’s rebound in the European stocks was overstretched and we might see some consolidation and even maybe some bearishness in the coming days,” Ozkardeskaya said.
The pan-European STOXX 600 index notched its biggest single-day jump in over a month yesterday on optimism over the Israel-Iran ceasefire.
Meanwhile, Spanish economy minister said his country does not expect any repercussions from its refusal to meet the defence spending target.
Ozkardeskaya added that Spain’s unwillingness to comply with the rest of the Nato countries when it comes to spending might be weighing on the Spanish index today.
Data also showed Spain’s economy slowed to 0.6% in the first quarter of 2025 compared to the previous period.
Today, European auto stocks led sectoral gains, rising 1.4%. European car sales rose 1.9% year-on-year in May, data by the European Automobile Manufacturers Association (ACEA) showed.
Stellantis rose 3.8% after Jefferies upgraded the carmaker to “buy” from “hold”.
Ferrari gained 3.7% after the Italian luxury car maker held late yesterday a briefing call ahead of its second-quarter results, with brokerage Bernstein saying its “tone remained as confident as ever”.
Defence stocks also advanced 1.4%.
Conversely, media stocks fell about 1%.
Babcock topped the STOXX index with a 12.6% rise after the British defence engineering company upgraded its medium-term guidance.
Investors are now awaiting US Federal Reserve chair Jerome Powell’s testimony before the Senate today to gauge when the central bank could cut rates next.