This was CNBC's live blog covering European financial markets.

European stock markets close higher

European stocks closed broadly higher on Tuesday, rounding off a calmer session following recent market rumbles.

The pan-European Stoxx 600 index finished 0.33% higher as expectations built that eye-watering 50% U.S. tariffs on the European Union — threatened by U.S. President Donald Trump on Friday last week — will be averted by a trade deal.

Germany's DAX index closed 0.83% higher at 24,226.49 points, surpassing its record closing high set last Wednesday.

Defense stocks including Hensoldt were among the best performers Tuesday, with fighting raging in the ongoing Russia-Ukraine war and Trump trading barbs with Russian officials, dampening hopes of a ceasefire. The European Union, meanwhile, signed off a previously announced 150 billion euro ($170 billion) arms fund aiming to boost regional security.

Attention was also on the bond market following last week's global sell-off. Government bond yields dipped in the U.S. and across most of Europe — a sign of higher prices and demand — after Reuters reported Japan may cut its issuance of longer-dated debt in response to rising borrowing costs. A lower supply of Japanese government bonds could push investors into other markets.

That's all from the Europe markets team today. On Wednesday we'll be watching the production output meeting of oil alliance OPEC+, and earnings from U.S. tech giant Nvidia. See you tomorrow.

— Jenni Reid

European and U.S. stock markets trade higher

European bourses are broadly higher in late deals, with the regional Stoxx 600 index up 0.45% and Germany's DAX up nearly 1% at 4 p.m. in London.

Markets are also in the green across the pond, with the Dow Jones Industrial Average trading 1.3% higher, the S&P 500 up 1.6% and the tech-oriented Nasdaq Composite popping 2%.

— Jenni Reid

The EU is seeking to 'quickly' set dates for trade talks, Trump says

In one of his regular morning updates on Truth Social, Trump said he is monitoring "positive" steps in trade talks with the European Union.

It comes after markets cheered his decision to delay a 50% tariff on goods from the bloc until July 9.

"I have just been informed that the E.U. has called to quickly establish meeting dates," Trump wrote in a post on the social media platform.

"This is a positive event, and I hope that they will, FINALLY, like my same demand to China, open up the European Nations for Trade with the United States of America."

Read more here.

— Katrina Bishop

OPEC+ must be 'mindful' of growing demand, UAE energy minister urges

The influence OPEC+ oil producers' alliance must bear in mind upcoming increases in global crude demand, the UAE energy minister said on the eve of a group ministerial meeting to decide output policy.

"This group is doing its best, but it's not enough only this group, we need the help of others," Suhail Mohamed al-Mazrouei said Tuesday in a World Utilities Congress panel moderated by CNBC's Dan Murphy.

"We need to be mindful of the demand. Demand is picking up. And demand is going to surprise us, if we're not investing enough."

His comments echo a position repeatedly expressed by OPEC+ ministers that oil producers should continue sustaining output capacity in order to avoid energy shortages throughout the green transition. Critics of the group argue that such investment runs contrary to decarbonization efforts.

Ministers of the broader OPEC+ are holding a virtual gathering to decide formal production policy on Wednesday, before eight group members that have been separately implementing two sets of voluntary output cuts meet at the end of the week. This latter subgroup has been slowly unwinding some of its production trims since March.

Oil prices have been depressed by the prospect of supply hikes and the U.S.-led trade war. The Ice Brent contract with July expiry was down 0.65% from the Monday close price at $64.32 per barrel at 2:25 p.m. London time, while the front-month July Nymex WTI futures hit $61.12 per barrel, 0.67% lower from the previous day's settlement.

— Ruxandra Iordache

British pound climbs against euro, U.S. dollar surges

In currency markets, the British pound is continuing its recent ascent against the euro, while the U.S. dollar broadly surges.

Sterling was up 0.26% against the euro at 12:55 p.m. in London, last trading around 1.193 euros — up from 1.175 euros at the start of May.

A series of better-than-expected data releases helped boost sentiment around the U.K. economy last week, while a spike in U.K. inflation to 3.5% in April from 2.6% in March has fueled expectations that the Bank of England will exercise more caution in rate cuts this year. Higher interest rates tend to support the value of a currency. The U.K. is also set to benefit from its recently-struck trade deal with the U.S., while the European Union remains mired in a tariff dispute with the White House.

"The massive inflation shock last week means that the Bank of England's recent hawkishness is fully validated and the pound looks set to remain the second highest-rate G10 currency after the dollar for the foreseeable future," Enrique Diaz-Alvarez, chief economist at Ebury, said in emailed comments Tuesday.

Elsewhere, the U.S. dollar index was 0.25% higher as the market eyes hopes for an EU trade breakthrough.

ING strategists said in a Tuesday note that April's market action showed the dollar "bears the brunt of tariff drama."

— Jenni Reid

European insurance giants take $3.5 billion hit from Los Angeles wildfires

Read the full story here.

European Union ministers sign off on 150 billion euro arms fund

Ministers from European Union countries on Tuesday approved a 150 billion euro ($170 billion) arms fund aiming to boost Europe's security and defense.

Their sign-off was the final legal step for establishing the Security Action for Europe financial instrument at a time when concerns are growing about attacks from Russia and the U.S.' commitment to supporting Europe's security.

"SAFE is a new EU financial instrument that will support those member states that wish to invest in defence industrial production through common procurement, focusing on priority capabilities," according to the Council of the European Union.

— Sophie Kiderlin

European government borrowing costs fall

Yields on government bonds ticked lower across the board in Europe on Tuesday morning, as investors continued to digest U.S. President Donald Trump's pause on 50% tariffs on the European Union.

The yield on German 10-year bunds, seen as a benchmark for the euro zone, was 4 basis points lower by 9:30 a.m. in London. The U.K.'s 10-year gilt yield dropped 4 basis points, while French 10-year government bond yields were also down by 4 basis points. Italian 10-year bond yields dipped 2 basis points, as their Swiss counterparts moved 4 basis point lower.

Bond yields and prices move in opposite directions — so a rise in demand can push prices higher and yields lower.

Regional government bonds with shorter and longer maturity periods also moved lower, with long-dated U.K. bonds — known as gilts — seeing the biggest movements. Yields on 20- and 30-year gilts edged 7 basis points lower.

In a note to clients on Tuesday, Deutsche Bank's Jim Reid argued that markets were becoming "more accustomed to Trump's threats and now partly assume the full threat won't immediately materialize."

"Interestingly the dollar hasn't rallied since the news on Friday and has instead edged lower. Investors are seemingly of the view that continued aggressive tariff headlines chip away at investors desire to hold US assets," Reid said. 

— Chloe Taylor

French inflation cools to 0.6% in May

Provisional data from Insee, France's statistics office, pointed to annual harmonized inflation increasing by 0.6% in May.

It marked a slowdown from April, when French inflation rose by 0.9% on an annual basis.

Slowing inflation could be attributed to a decline in the price of services, Insee said as it released the data on Tuesday, alongside contracting energy costs. Food prices were bucking the trend and increasing in France.

— Chloe Taylor

European stocks rise in early trade

European stock markets have broadly risen in the first 15 minutes of the trading day.

The Stoxx Europe 600 index opened 0.2% higher, while the FTSE 100 posted a gain of 0.8%.

Meanwhile, France's CAC 40 declined by 0.2% and Germany's DAX held steady.

— Ganesh Rao

German consumers feel more optimistic — but they’re hesitant to spend as tariffs threat lingers

German consumer sentiment improved in May, the GfK Consumer Climate report showed on Tuesday, but U.S. tariffs policies were found to be dampening willingness to spend.

The report marked the third consecutive month in which the index moved higher, driven in part by slowing inflation and "good wage settlements" — but despite the improvement, sentiment remained low and consumers were hesitant to make discretionary purchases, analysts said.

"The unpredictable customs and trade policy of the US government, turbulence on the stock markets and fears of a third consecutive year of stagnation are reasons why the consumer climate remains weak," Rolf Bürkl, consumer expert at the NIM, said in a statement on Tuesday. "In view of the general economic situation, people seem to think it advisable to save."

The GfK Consumer Climate, which surveyed around 2,000 German consumers between May 1 and May 12, was jointly published by NIQ and the Nuremberg Institute for Market Decisions.

— Chloe Taylor

Some UK retailers are lowering prices to get ahead of tariffs, BRC says

Diving deeper into the British Retail Consortium's inflation data, it appears that some U.K. retailers may be strategically lowering prices in a bid to get ahead of looming U.S. tariffs.

"Non-food prices remained in deflation, but this slowed in categories such as fashion and furniture as retailers began to unwind heavy promotional activity," BRC chief Helen Dickinson said in a statement on Tuesday. "Prices were falling faster for electricals as retailers tried to encourage spending before any potential knock-on impact from U.S. tariffs."

In the non-food category, prices contracted by 1.5% year on year in May, the BRC's data showed.

U.S. President Donald Trump recently threatened a 25% tariff on Apple in a bid to force the tech giant into moving production into the United States — a move that some have cautioned would drastically raise prices of the company's products. Last month, the U.K. and the U.S. agreed on the framework for a trade deal — but uncertainties remain around how the Trump administration's tariffs policies will affect wider supply chains.

— Chloe Taylor

U.K. food inflation jumps for fourth month in a row

Food inflation in the U.K. rose by 2.8% year-on-year in May, according to the British Retail Consortium, marking the fourth consecutive month of price rises.  

The figure was up from 2.6% year-on-year growth in April, and above the three-month average of 2.6%.

Helen Dickinson, Chief Executive of the BRC, said in a statement on Tuesday that fresh food prices were the main driver of the price rises, with wholesale beef prices increasing. She argued that increased costs being leveraged on businesses were having an inflationary impact.

"With retailers now absorbing the additional £5bn in costs from April's increased Employer National Insurance contributions and National Living Wage, it is no surprise that inflation is rearing its head once again," she said.

— Chloe Taylor

European stock markets expected to open slightly lower

European stock markets are expected to have a mostly negative open on Tuesday.

Futures contracts tied to the Stoxx Europe 600 index point to a 0.2% loss at the open, while Germany's DAX is poised to be in the red by 0.1%. Meanwhile, France's CAC 40 is expected to open flat, and the U.K.'s FTSE 100 is bucking the trend with a 0.8% gain.

— Ganesh Rao