Stoxx 600, FTSE, DAX, CAC 40

Britain’s government is planning to ramp up public spending — but market watchers warn the proposals risk sending jitters through the bond market further inflating the country’s $143 billion-a-year interest payments.

The U.K. government’s long-term borrowing costs spiked to multi-decade highs in January, and the yield on 20- and 30-year gilts continues to hover firmly above 5%.

One commentator said the U.K. government’s spending plans “could create a snowball effect, as investors could potentially become nervous to hold UK debt, which could lead to a further selloff until fiscal stability is restored.”

Read more about it here.

— Ganesh Rao

Crude oil futures have fallen around 2% as traders monitor tensions in the Middle East.

U.S. West Texas Intermediate was last down $1.2, or 1.76%, to $66.96 a barrel. Global benchmark Brent fell $1.17, or 1.68%, to $68.61 per barrel.

Israel is considering taking military action against Iran without U.S. support in the coming days, five people with knowledge of the situation told NBC News.

Oil prices jumped more than 4% in the previous session after the State Department said it was preparing to evacuate non-essential personnel from the U.S. embassy in Baghdad.

— Spencer Kimball, Jenni Reid

BNP Paribas has outlined some of the ways in which European investors are reducing their exposure to the U.S. dollar in a note out this afternoon.

Danish pension funds have cut their exposure by $37 billion since the start of the year, FX strategists led by Alex Jekov found, while the unhedged U.S. dollar exposure of Dutch pension funds fell by around $50 billion.

“Our analysis suggests there is much more still to come,” they added.

The U.S. dollar index was last down by around 0.7% on Thursday, and is around 10% lower in the year to date.

— Jenni Reid

The euro has climbed more than 1% to $1.16, its highest level against the U.S. dollar since November 2021, amid a broader weakening of the greenback.

The dollar has become a lightning rod for investor sentiment on the path of U.S. tariff policy, which generally appears to be dour on Thursday, dragging down European, Asian and U.S. stock markets.

In a note, ING senior economist Inga Fechner said the latest developments showed tariffs were “here to stay” and deals so far were “largely symbolic.” Details of the U.S.-China deal remain unclear and could still fall apart, she said in a note.

“We believe that the average tariff rate is unlikely to shift significantly, as other tariff measures are expected to offset any reductions resulting from trade deals or court rulings,” she added.

European stock markets are still in negative territory in mid-morning deals, with the Stoxx 600 index down 0.7% as the global trade outlook remains murky. The U.K.’s FTSE 100 has given up earlier slight gains and was last down roughly 0.2% after notching its record high yesterday.

BE Semiconductor is an outlier, up 7.3%, after the Dutch chip equipment-maker raised its long-term target revenue forecast.

U.K. grocery chain Tesco has ticked 3% higher as investors digest its higher sales figures and reiterated guidance. Russ Mould, AJ Bell’s investment director, said the trading statement showed Tesco was “at the top of its game, achieving moderate but resilient sales growth and continuing to grow its market share.”

Travel stocks were already in the red on Thursday morning, with Germany’s Tui down over 7%. Sector losses deepened as news broke that an Air India plane crashed near an airport in the western Indian city of Ahmedabad. The airline has confirmed an “incident” occured.

— Jenni Reid

The British pound was roughly flat against the U.S. dollar, though dipped 0.3% against the euro after the national statistics office said the U.K. economy contracted 0.3% in April while the country’s trade deficit widened.

Yields on U.K. government bonds were broadly lower, with the 10-year gilt yield down 4 basis points and the 2-year yield down around 3 basis points.

This week, investors have also been digesting the U.K. government’s spending review, which committed more money toward housing and transport, and data showing cooling wage growth and a fall in job vacancies, which led markets to fully price in a further half-percentage-point in interest rate cuts this year.

— Jenni Reid

European stock markets have opened sharply lower, with the Stoxx 600 index falling 0.42% and almost all sectors in the red led by travel, down 1.5%.

U.K. goods exports to the U.S. dropped £2 billion ($2.71 billion) in April, according to the Office for National Statistics, the biggest monthly drop since records began in 1997.

The value of exports was the lowest since February 2022, with the ONS saying the shift was “likely linked to the implementation of tariffs on goods imported to the United States.”

U.S. imports to the U.K. fell by £400 million for the month.

The U.K. and U.S. announced the outline of a trade deal at the start of May, but the agreement still imposed 10% blanket tariffs on British goods sent stateside and has not yet been fully implemented, leaving 25% duties on steel, aluminum and autos.

Overall, the U.K.’s trade deficit in goods rose by £4.4 billion to £60 billion in the three months to April, as its trade surplus in services dipped by £500 million to £48.5 billion.

— Jenni Reid

U.K. Chancellor Rachel Reeves said the latest monthly GDP print was “clearly disappointing” after data showed the economy shrank 0.3% contraction in April, on a monthly basis.

“Our number one mission is delivering growth to put more money in people’s pockets through our Plan for Change, and while these numbers are clearly disappointing, I’m determined to deliver on that mission,” she said in a statement out Thursday.

Reeves said the spending review she delivered to lawmakers on Wednesday, in which she laid out expenditure and investment plans for all government departments for the next few years, showed the Treasury was ambitious to deliver jobs and growth.

“Whether that’s improving city region transport, a record investment in affordable homes or funding Sizewell C nuclear power station. We’re investing in Britain’s renewal to make working people better off,” she commented Thursday.

— Holly Ellyatt

Mounting trade tensions and tariffs have become the single biggest worry for global investors, overshadowing all other economic risks, a new survey shows.

Nearly two-thirds (63%) of institutional investors and wealth managers identified trade levies as the most significant macroeconomic concern impacting their strategy, according to a survey published by British investment manager Schroders.

CNBC’s coverage of the VivaTech summit in Paris continues on Thursday. We’ll be reporting from Goldman Sachs’ annual European Financials Conference in Berlin too.

On the data front, the U.K.’s monthly gross domestic product print is due Thursday morning, and earnings are set to come from retail giant Tesco.

— Holly Ellyatt

Welcome to CNBC’s live blog covering European financial market action and the latest regional and global business news, data and earnings.

Futures data from IG suggests London’s FTSE will open 33 points lower at 8,838, Germany’s DAX down 189 points at 23,783, France’s CAC 40 down 44 points at 7,732 and Italy’s FTSE MIB 282 points lower at 39,858.

— Holly Ellyatt