European stocks fall, sterling and UK banks slide on political turmoil

LONDON — European stocks opened in negative territory as prospects for a speedy resolution to the U.S.-Iran war appear increasingly remote, while U.K. Prime Minister Keir Starmer's premiership hangs by a thread.

The pan-European Stoxx 600 was 0.8% lower shortly after 10:00 a.m. in London (5:00 a.m. E.T.), with all sectors and major bourses firmly in negative territory.

Investors are watching a growing political crisis in the U.K., as government ministers joined more than 70 Labour Party lawmakers with calls for Starmer to resign or set out a timetable for his departure. It comes after the ruling party's dire performance in local council elections last week.

But Starmer told his weekly cabinet meeting Tuesday that he was not resigning and would instead "get on with governing". He reminded colleagues that the Labour Party has a process for leadership challenges, which had not yet been triggered.

The prime minister took responsibility for the poor election results and acknowledged on Monday that he had "doubters". Starmer pledged to "face up to the big challenges" facing the country, but the speech failed to impress party insiders as several ministerial aides quit on Monday.

Yields on U.K. government bonds, known as gilts, extended gains on Tuesday morning. The yield on the benchmark 10-year gilt was last seen almost 12 basis points higher at 5.126%.

U.K. 10-year gilt

The British pound, meanwhile, was down 0.6% against the U.S. dollar, and lost 0.3% versus the euro. British banking stocks led U.K. equity market losses, with Natwest down 4.1%, Lloyds down 4.2%, and Barclays down 4.1%.

Meanwhile, optimism over a looming U.S.-Iran peace agreement was dealt a reality check late on Monday when President Donald Trump said the ongoing ceasefire is "on life support" after Tehran sent an "unacceptable" counter to Washington's proposal to end the war.

The state of the month-old truce is "unbelievably weak," Trump told reporters in the Oval Office.

Oil prices rose in response to the comments and, overnight, bourses in the Asia-Pacific region traded in mixed territory. Meanwhile, U.S. stock futures hovered near the flatline on Monday night as traders looked ahead to the release of April's consumer price index reading. Economists polled by Dow Jones expect inflation to have gained 3.7% from a year earlier.

Corporate earnings also remain in focus, with Siemens Energy, Munich Re and Imperial Brands among the firms updating shareholders on their finances on Tuesday.

In its first-quarter earnings release, German biotech giant Bayer reported a 9% jump in operating profit, which came in at a stronger-than-expected 4.5 billion euros ($5.3 billion) when adjusted for special items. It also reiterated its full-year guidance.

Bayer shares were up more than 6% in morning trade.

Bayer went before the U.S. Supreme Court late last month in a bid to bring thousands of lawsuits against its herbicide Roundup to an end. The company acquired Roundup maker Monsanto for $63 billion in 2018 and has faced years of litigation since the deal was completed, amid claims that glyphosate, an ingredient in the weedkiller, has been the cause of health issues, including cancer.

Bayer is expecting a decision on its Supreme Court case by June. In its earnings report on Tuesday, the firm said the Roundup litigation remained a "legal risk," noting that Monsanto had agreed to major settlements over the claims in early 2026, which include a proposed U.S.-wide class settlement funded by up to $7.25 billion over 21 years.

Complainants are able to opt out of the settlement until June 4, with Monsanto reserving the right to terminate the class settlement if the number of opt-outs is "excessive."

Elsewhere, London-listed telecoms giant Vodafone reported its fiscal full-year earnings on Tuesday morning. Revenue jumped 8% year-on-year to 40.5 billion euros, falling slightly short of a consensus estimate compiled by LSEG.

The growth, which Vodafone attributed to strong service revenue and the consolidation of British mobile network Three, saw the company swing to an operating profit of 2.8 billion euros after delivering a loss of 0.4 billion euros the previous year. Analysts had been expecting profit of around 2.1 billion euros, according to an LSEG consensus.

Vodafone shares were last seen 3.2% lower.