European shares end May higher as trade uncertainty persists

By Nikhil Sharma, Purvi Agarwal and Ragini Mathur

(Reuters) -European shares closed higher on Friday, rounding off the month with gains in a still uncertain trade environment as investors assessed the latest developments in U.S. President Donald Trump's tariff plan.

The continent-wide STOXX 600 index ended 0.1%higher, brushing off a temporary reinstatement of the most sweeping Trump's tariffs on Thursday, a day after another court ordered an immediate block on them.

However, the benchmark index pared most gains after Trump said on Friday that China had violated an agreement on tariffs and issued a new threat to get tougher with Beijing, without revealing details.

"It is a whole different situation that we are going to be in... it's longer and slower and more complicated," said Jochen Stanzl, chief market analyst at CMC Markets, pointing to the developments on the tariff front.

The index still posted its first monthly advance in three, rising about 4%, while also ending the week higher, as investors capitalised on Trump's decision to postpone tariffs on the EU, opening the door for Brussels to produce a trade deal with Washington and recent U.S. fiscal concerns that sent investors flocking to assets outside the U.S.

On the day, most sectors were higher, with utilities and healthcare shares up 0.8% each

Construction and materials stocks were at the bottom, down 1%.

"This is very much driven by momentum and some fear of missing out... investors over the past few months have been trained to buy the dip to some extent," said Stanzl.

Europe's aerospace and defence index was the top winning sector for the month, up about 14%, as dimming hopes of a truce between Russia and Ukraine persuaded investors to buy ammunition stocks.

Germany's DAX 40 ended 0.3% higher. Data showed German inflation eased further in May, bringing it closer to the European Central Bank's 2% target and bolstering the case for an interest rate cut next week.

Another dataset showed German retail sales fell by 1.1% in April compared with the previous month.

M&G gained 5.5% after it said Japanese life insurer Dai-Ichi Life Holdings will take a 15% stake in the British insurer and asset manager as part of a strategic deal.

French pharmaceutical company Sanofi fell 4.8% to a more than one-year low after its experimental drug Itepekimab failed to meet certain conditions.

Carrefour fell 6% to the bottom of the STOXX 600 as the French food retailer traded without entitlement to its latest dividend payout on Friday.

(Reporting by Nikhil Sharma, Purvi Agarwal and Ragini Mathur; Editing by Janane Venkatraman and Elaine Hardcastle)