European shares climb on softer-than-feared Iran sanctions, defence gains

European shares edged higher on Tuesday as investors took comfort in a softer-than-feared U.S. sanctions package against Iran, while gains in defence stocks boosted sentiment. The ‌pan-European STOXX 600 was up 0.3% at 656.57 points, as of 0907 GMT. Iran promised to retaliate against the expanded U.S. sanctions and said it was confident major trading partners would resist Washington's pressure campaign. Oil prices fell further as traders saw little immediate threat to ‌global crude supplies from the latest U.S. measures. On Monday, the Trump administration warned countries to cut their business ties ‌with Iran or face secondary sanctions as part of what it billed as an "economic D-Day," though the Treasury Department stopped short of imposing any penalties. U.S. Treasury yields eased from recent peaks after reports the Treasury may use its cash reserves to fund larger debt buybacks, which could reduce the ⁠need ​for additional sales of short-term bills.

Federal ⁠Reserve Chair Kevin Warsh's debut speech at the Jackson Hole symposium later this week is in focus, with investors looking for clues on the recent ⁠rise in bond yields and reassurance about the central bank's independence. In Germany, the economy grew 0.3% in the second quarter from the previous ​quarter, above a preliminary estimate of 0.2%, helped by stronger exports. Meanwhile, defence stocks led sectoral gains, rising 1.2%, after ⁠aerospace firm Melrose Industries jumped 8.8% as the GKN Aerospace owner said it aims to resume full production at its Garden Grove facility by September ⁠28 ​and expects to pay up to $100 million to settle damage claims related to a May incident involving an overheating chemical tank.

The tech sector rose 0.4%, with investors awaiting Nvidia's results on Wednesday amid concerns the chipmaker may struggle to meet ⁠lofty expectations. "The combination is instructive: lower energy and duration pressure can support the wider market, but technology is increasingly waiting for ⁠earnings confirmation rather than simply responding ⁠to a lower discount rate," Florian Ielpo, head of macro and multi-asset portfolio manager at Lombard Odier Investment, said in a note.

On the flip side, luxury stocks were the worst-performing sector, ‌down 1.1%, while ‌automobile stocks followed with a 0.8% decline.