Stocks in Europe End Positively, Boosted by Trade Deal Optimism

Stocks in Europe End Positively, Boosted by Trade Deal Optimism

The European Union and the United States have reached a preliminary agreement on a trade deal, aiming to impose a 15% tariff on the majority of EU exports to the US, while keeping the EU market open and investing significantly in the US economy.

Under the tentative agreement, European goods entering the US market will be subject to a 15% tariff, replacing the threat of more severe tariff hikes and averting a potential tariff war. In return, the EU has agreed to open its markets to US goods at a zero tariff, commit to substantial investments into the US economy, and purchase $750 billion of US energy supplies.

The deal has been welcomed by European leaders, with German politician Friedrich Merz endorsing it as a means to avoid escalating tensions and bring more predictability to trade relations. Dutch Prime Minister Dick Schoof appreciated the clarity and market stability the deal brings, despite initial hopes for zero tariffs on both sides.

The agreement is expected to reduce uncertainty and volatility in transatlantic trade relations, supporting stock market stability on both sides of the Atlantic. However, the imposition of a 15% tariff on EU exports to the US could negatively affect European exporters' profitability and share prices in sectors reliant on the US market, such as automotive.

On the other hand, US industries gaining greater access to the EU market at zero tariffs and benefiting from significant EU investments and increased energy purchases may see positive market sentiment. Overall, the deal's stabilizing effect and the large-scale investment commitments are likely to have a positive neutralizing impact amidst prior fears of severe trade disruption.

In the UK market, Informa gained about 5% after raising its full-year revenue guidance and announcing £150 million in additional share buybacks. In Paris, Stellantis soared about 9%. Ashtead Group, Croda International, Associated British Foods, Smith & Nephew, GSK, IAG, Mondi, Bunzl, 3i Group, Spirax Group, Shell, Glencore, IMI, Antofagasta, Schroders, and Rentokil Initial gained 1 to 2.6%.

In the German market, Daimler Truck Holding, Porsche, Volkswagen, Mercedes-Benz, and BMW gained 4 to 7.5%. Siemens Energy, Puma, BASF, Deutsche Post, Siemens, Merck, Bayer, Beiersdorf, Continental, Commerzbank, Brenntag, and Deutsche Bank climbed 2 to 6.5%. Siemens Healthineers, Symrise, Heidelberg Materials, Rheinmetall, and Allianz also posted strong gains.

However, some European stocks ended notably lower, including Centrica, Infineon Technologies, Kering, SAP, Thales, E.ON, RWE, Vonovia, Adidas, and Zalando. The U.S. has also announced a trade deal with Japan, featuring a 15% tariff on Japanese exports and a commitment from Tokyo to invest $550 billion in the United States and open its markets for American vehicles, rice, and other agricultural goods.

The prospects of an EU-US trade agreement have improved, as EU representatives are expected for trade negotiations. European stocks closed on a strong note on Wednesday, with the pan-European Stoxx 600 climbing 1.18%. Specifically, the UK's FTSE 100 ended 0.52% up, Germany's DAX gained 0.86%, and France's CAC 40 closed higher by 1.42%. Switzerland's SMI settled higher by 1.54%.

Among other European markets, Belgium, Czech Republic, Denmark, Finland, Greece, Ireland, Netherlands, Poland, Russia, and Sweden closed with sharp to moderate gains. Norway and Spain edged up marginally, while Portugal and Turkey ended weak, and Iceland closed flat.

JD Sports Fashion closed 4.65% up, and AstraZeneca climbed 3.1%. French train maker Alstom gained about 6% as first-quarter sales topped estimates. L'Oreal announced that its net profit remained flat in the first half compared to the previous year due to higher financial and tax expenses.

In the world of fashion, Kering climbed nearly 5%, while SAP ended more than 4% down, despite maintaining its full-year targets and reporting higher quarterly sales and earnings. Teleperformance, Saint Gobain, LVMH, Renault, Sanofi, and Hermes International gained 2.3 to 4%.

Looking ahead, for fiscal 2025, Thales expects adjusted EBIT margin to be in the range of 12.2% to 12.4%. The latest update on the EU-US trade agreement, finalized on July 27, 2025, is that the two sides have reached a tentative deal to impose a 15% tariff on the vast majority of EU exports to the US, excluding pharmaceuticals and metals. The deal is considered preliminary and will require further detailing and ratification.

1. The EU's agreeing to open its markets to US goods at a zero tariff and the commitment to substantial investments into the US economy are expected to positively impact US industries, particularly those gaining greater access to the EU market and benefiting from increased investments.
2. The preliminary EU-US trade deal, which imposes a 15% tariff on the majority of EU exports to the US, might negatively affect European exporters' profitability, especially those reliant on the US market, such as those in the automotive sector.

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