European markets rise, UK gilts volatile as pressure mounts on PM Starmer

LONDON — European stocks opened higher on Wednesday, bouncing back from losses in the previous session, while U.K. gilt yields fell back after Prime Minister Keir Starmer defied calls to quit office.

The pan-European Stoxx 600 index was seen 0.4% higher, with most sectors and major bourses in positive territory.

Yields on U.K. government bonds, known as gilts, saw double-digit gains on Tuesday as investors feared a deterioration of fiscal discipline under new leadership. Yields fell 3 to 4 basis points across durations on Wednesday morning as nerves calmed, but narrowed on reports Starmer's leadership rival West Streeting is preparing to resign as health secretary.

By 1 p.m. in London, the U.K. bond market staged a fresh bout of volatile trade, with yields on the 2-year gilt down 4 basis points while those on longer-term bonds were marginally higher. The moves came as the BBC reported Streeting's political allies expected him to launch a leadership challenge to Starmer as early as Thursday.

Earnings reports come from Allianz, Deutsche Telekom, Zurich Insurance, Eon, Merck, RWE, Hapag-Lloyd and Porsche on Wednesday.

German automation giant Siemens has launched a new 6 billion euros ($7.04 billion) share buyback program covering the next five years, after posting a forecast-beating net profit of 2.03 billion euros for the first quarter.

Siemens shares fell 1.3% in early morning trade.

The move upwards comes after European stocks traded in negative territory on Tuesday as prospects for a speedy resolution to the U.S.-Iran war appeared increasingly remote, and U.K. Prime Minister Keir Starmer's premiership looked highly vulnerable to a leadership challenge.

Starmer told his weekly cabinet meeting Tuesday that he was not resigning following the Labour Party's poor local election performance last week, insisting he would "get on with governing." He remains under pressure with ministerial aides and several junior ministers resigning in recent days.

Global investors will be focusing on developments related to the upcoming meeting between U.S. President Donald Trump and Chinese President Xi Jinping, where trade and the Iran war are expected to be discussed.

Trump on Monday said the month-old ceasefire between the U.S. and Iran was "unbelievably weak" and "on massive life support", after rejecting an "unacceptable" counterproposal from Tehran to end the conflict.

Defense Secretary Pete Hegseth said Trump doesn't need congressional approval to restart strikes on Iran. The comment comes after the administration passed the 60-day mark required by federal war powers law to receive authorization for military force.

Asia-Pacific markets were mixed Wednesday, as investors digested the hotter-than-expected U.S. inflation reading for April amid concerns over higher oil prices.

U.S. traders will look forward to more inflation data on Wednesday, with April's producer price index due later in the session. Economists polled by Dow Jones are expecting a headline increase of 0.5% on the month, in line with March's rate. U.S. stock futures broadly rose early Wednesday. 

— CNBC's Lisa Kallai Han and Justina Lee contributed to this market report.