After U.S. President Donald Trump delayed a planned 50% tariff on goods from the European Union, European stocks rebounded from last week’s losses to start the week strongly on Monday. The action relieved investors and boosted confidence in industries closely tied to transatlantic trade.
European stocks rebound after Trump delays tariffs
Following Friday’s 0.9% decline brought on by Trump’s sudden warning of steep duties, the pan-European STOXX 600 index increased 1%. Trump pushed back the initial June 1 deadline to July 9 on Sunday in response to European Commission President Ursula von der Leyen’s request for more time for negotiations.
“While more time for EU-U.S. negotiations is good news, the speed of the rebound in stocks suggests that investors may have become too optimistic on the path for trade discussions” said Mark Haefele, Chief Investment Officer at UBS Global Wealth Management.
The industries most affected by tariffs drove the market’s increase. The autos and parts index rose 1.8%, though a 3.3% drop in Porsche shares limited the gains. Rheinmetall and Leonardo both saw increases of more than 3%, while the aerospace and defense industry saw a 1.7% increase. The overall industrial goods and services index increased by 1.5% as a result of the defense’s strength.
Thanks to strong results in the automotive and defense industries, German stocks were among the best performers, rising 1.7% and getting close to all-time highs. LVMH, Kering, and Richemont, three luxury goods companies, each saw a modest increase of about 1%. These businesses profited from a decreased fear of retaliatory tariffs because they were highly exposed to U.S. consumer demand.
Markets Gain Amid Trade Relief, But Investor Caution Lingers
The euro and other risk-sensitive currencies gained as a result of the currency markets’ positive reaction to the easing trade tensions. The yields on Eurozone government bonds stayed largely unchanged. But as worries about the U.S. economy and fiscal difficulties have grown, investor sentiment has begun to change.
“If you want to have a low-risk portfolio, the U.S. is where you would go first, but with the trade tensions and geopolitical tensions, this favourable sentiment has shifted,” said Ipek Ozkardeskaya, senior market analyst at Swissquote Bank. Public holidays in the US and the UK kept trading activity muted, but U.S. futures indicated robust gains, with major indexes rising more than 1% in early trading.
Following reports that the company would hold a shareholder meeting on August 8 to vote on spinning off its naval shipbuilding division, Thyssenkrupp saw an 8.8% increase in corporate news. Regarding the report, the company chose not to comment. Although no particular catalyst was mentioned, Zealand Pharma led the STOXX 600 index, which jumped 10%.
Investors continue to exercise caution as markets process the tariff reprieve and keep a close eye out for indications of significant advancements in the trade talks between the United States and the European Union.
Featured Image Credit: Kaboompics.com; Pexels: Thank You!
