(Bloomberg) — European stock futures rallied after the US and European Union agreed to a trade deal.
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The pact, which will see the bloc face 15% tariffs on most of its exports including autos, was announced Sunday by President Donald Trump after a meeting with European Commission President Ursula von der Leyen. The European leader said the rate would be all inclusive, though Trump said it did not include pharmaceuticals and metals.
Futures on the Euro Stoxx 50 rose 1% as of 2:18 a.m. Monday in Paris, while contracts on Germany’s Dax climbed 0.9%. The euro was up 0.2% against the dollar at $1.1768, after advancing 1% last week.
John Plassard, head of investment strategy at Cité Gestion, said the deal is “good enough to unlock what equity markets needed most: visibility.”
“Tariff escalation risk is now off the table, and with that, a major macro overhang disappears. For investors, that’s not just a sigh of relief, it’s a green light,” he said.
Sectors most exposed to trade, including autos and consumer products, had outperformed Friday as investors were optimistic that an agreement would be reached before the Aug. 1 tariff deadline.
European stocks have been range-bound since May due to jitters around the outlook for global trade. The benchmark Stoxx 600 is now 2.3% below its March record high. A UBS basket of stocks sensitive to tariffs has underperformed this year, suggesting there’s room for the group to catch up to the broader regional benchmark.
“I do think there will be a relief rally as soon as the details are finalized, and this is a much needed shot in the arm for European stocks as earnings season is in full swing,” said Geoff Yu, a macro strategist for EMEA at BNY Mellon.
Focus will be on carmakers, such as Stellantis NV, Volkswagen AG, Mercedes-Benz Group AG and BMW AG, as well as auto parts suppliers like Valeo SE, Forvia SE and Pirelli & C SpA. A gauge for the sector is flat on the year, missing out on Europe’s broader rally.
Investors will also be watching luxury goods makers including LVMH, Kering SA and Salvatore Ferragamo SpA, given North America is a significant market for the luxury sector.
Drinks makers including Diageo Plc, Remy Cointreau and Pernod Ricard will be in focus, as well as shipping stocks such as A.P. Moller-Maersk A/S and Hapag-Lloyd AG, given freight’s sensitivity to tariffs.
Still, some investors warned that the rally could be short-lived until more details of the trade agreement are announced.
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