FILE PHOTO: A person walks near the Milan Bourse (Italian stock exchange) as global markets brace for a hit to trade and growth caused by U.S. President Donald Trump's decision to impose import tariffs on dozens of countries, in Milan, Italy, April 3, 2025. REUTERS/Claudia Greco/File Photo

By Purvi Agarwal and Pranav Kashyap

(Reuters) -European shares closed little changed on Tuesday in cautious trade as investors awaited the outcome of the second day of U.S.-China trade talks in London.

The continent-wide STOXX 600 index closed unchanged for the second straight day, at 553.12 points.

The two-day London meeting between the world's two economic powerhouses was still ongoing, a U.S. Treasury spokesperson said, while a separate U.S. official had said the two sides had ended direct talks.

While President Donald Trump's upbeat comments on Monday about the talks had offered some hope the two countries would defuse their bitter trade dispute, the silence about any progress kept a lid on any breakout in stock markets.

Any positive breakthrough in the negotiations is likely to provide relief to markets given that Trump's erratic tariff policies and the volatility of Sino-U.S. relations have already scarred both economies, dented supply chains, and cast a shadow over global growth projections.

"There's a lack of clarity on what an actual deal could be," said Laura Cooper, head of macro credit and investment strategist at Nuveen.

"Until we see a substantial trade deal emerge, attention will be on the end of that 90-day pause and its implications if there isn't a deal in place."

The two countries are trying to revive a temporary truce reached in Geneva that had briefly lowered trade tensions and calmed markets.

In European stocks, the financials index, shed 1.4%, led by a near 5% drop in UBS on investor concern that Swiss government proposals could shackle the bank with an additional $26 billion capital mandate.

Defense stocks also retreated to an over one-week low.

Conversely, energy stocks were the stand-out performer, boosted by higher oil prices. [O/R]

The healthcare sector advanced 1.2%, led by Novo Nordisk, which gained about 6% following a Financial Times report that activist hedge fund Parvus Asset Management was building a stake in the drugmaker.

Vaccine makers such as AstraZeneca and Sanofi also climbed, despite the U.S. health secretary dismantling the U.S. Centers for Disease Control and Prevention's vaccine advisory committee.

London's FTSE 100 flirted with a record high earlier in the session after fresh data revealed a sharp deceleration in British pay growth through April, coupled with unemployment hitting a four-year peak - strengthening the case for an interest rate cut by the Bank of England.

Attention is also on a slew of key economic indicators from the region as well as the U.S., due through the week.

"With U.S. CPI data due on Wednesday, the mood could remain cautious," said Fiona Cincotta, senior market analyst at City Index.

Among other stocks, Bellway jumped 7.8% after the British homebuilder raised its forecast for full-year volume production.

Shares of Aberdeen gained 6.3% after J.P. Morgan upgraded the fund manager's stock to "overweight" from "neutral".

(Reporting by Purvi Agarwal, Ragini Mathur and Pranav Kashyap in Bengaluru; Editing by Sherry Jacob-Phillips and Emelia Sithole-Matarise)