European Stocks Rise Despite Mixed Economic Data and ECB Caution

European stock markets finished Tuesday on a positive note, with investors reacting to a mix of economic reports and comments from European Central Bank (ECB) officials. The pan-European Stoxx 600 index rose 3.01 points, or 0.48%, to 636.63. Germany’s DAX led the gains with a 0.77% increase, while Britain’s FTSE 100 added 0.42%. France’s CAC 40 climbed 0.40%, and Italy’s FTSE MIB posted the strongest percentage gain at 0.87%. Spain’s IBEX 35 also rose 0.75%.

The data released on Tuesday was mixed. German manufacturing orders plummeted 10.6% in August, following a revised 3.2% increase in July. The decline was attributed to a drop in large orders for aircraft, ships, trains, and military vehicles. Excluding these large-scale orders, new orders slipped just 0.1%. Meanwhile, Eurozone retail trade volume edged up 0.1% in August after falling 0.6% in July, with sales rising 0.8% year-on-year. In France, manufacturing output rebounded 0.3% in August after declining 0.8% in July, though overall industrial production fell 0.3%.

Bank of Finland Governor Olli Rehn cautioned that a prolonged Middle East war could increase the risk of higher energy prices spreading to other prices and wages. He noted that while these spillovers had not yet emerged, rising long-term interest rates were slowing growth and limiting the transmission of energy costs to broader inflation. Rehn emphasized that the ECB would continue making interest rate decisions meeting by meeting, based on incoming information, amid heightened uncertainty.