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

European stocks rose 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 closed 0.7% 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 across durations on Wednesday morning as nerves calmed, but narrowed on reports Starmer’s leadership rival Wes Streeting is preparing to resign as health secretary.

By 4:35 p.m. in London, the yield on the 2-year U.K. gilt was down 6 basis points, while those on longer-term bonds fell between 3 and 4 basis points. The moves came after the BBC reported Streeting’s political allies expected him to launch a leadership challenge to Starmer as early as Thursday.

Earnings reports came from Allianz, Deutsche Telekom, Zurich Insurance, Eon, Merck KGaA, 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 closed higher, paring losses earlier in the trading session.

The move upwards for European stocks comes after the index 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.