The recent agreement between the United States and China on tariffs and also the agreement reached between Washington and the European Union came as a relief to investors amid months of tariff tensions. This news comes as an international demonstration of diplomacy, as it reduces the chances of additional tariffs, at least in the short term, and also demonstrates the interest and need of major economies to reduce the rise in international protectionism.
Trade optimism lifts European markets
European shares closed higher on Tuesday on optimism about the U.S.-China tariff truce and interest rate cuts by the U.S. Federal Reserve, while declines in heavyweight technology stocks limited gains.ย Investors were relieved after Washington and Beijing extended a tariff truce by 90 days, staving off triple-digit duties on each other’s goods until November 10.
“Equity markets have been pretty relaxed about all the trade news. The assumption seems to be that (U.S. President Donald) Trump will relent on everything and that it will all be OK,” said Rob Perrone, investment specialist for Orbis Investments. “If the news is better than yesterday’s, then stocks go up.”
Tech sell-off tempers broader market gains
Most sectors on the benchmark STOXX 600 .STOXX rose, led by energy .SXEP with a 1.5% advance. Vestas Wind Systems VWS.CO outperformed peers with a 4.7% gain, after receiving U.S. orders for undisclosed projects. Heavyweight tech shares .SX8P fell 2.1% to their lowest levels since early May. Software stocks in particular fell sharply on concerns that artificial intelligence could weaken this technology segment. SAP SAPG.DE slid 7%, while Nemetschek SE NEKG.DE was down 11%, the biggest decliners on the index. The stocks logged their steepest one-day declines since 2020.
The positive sentiment was also reflected in other global financial markets. In Hong Kong, the Hang Seng Index closed with gains of 0.7%, supported by news that Beijing and Washington are expected to extend the tariff truce for another three months. In Japan, the Nikkei fell 1.1%, in a correction influenced by the weaker performance of export-related sectors.
Mixed performances across European indexes
Most regional indexes were higher, but Germany’s DAX .GDAXI, dipped 0.2%. German investor morale fell more than expected in August, an index showed. Latest earnings forecasts showed companies are expected to report 4.8% growth in second-quarter earnings, on average, above the previously expected 3.1%, according to LSEG I/B/E/S data.
In the United States, index futures for the Nasdaq and S&P 500 posted moderate gains of 0.4% and 0.2%, respectively, suggesting a continuation of the positive trend on Wall Street. The Dow Jones Industrial Average, meanwhile, remained close to its all-time high reached at the end of last year.
Earnings in Europe have been resilient so far, partly because the recent EU-US tariff deal has eased concerns over how Trump’s levies might affect corporate performance. Moreover, data showed U.S. inflation rose broadly in line with expectations in July, putting the Fed on track to lower interest rates next month. Markets also eyed a Friday meeting between Trump and Russian President Vladimir Putin on Russia’s war in Ukraine.
Geopolitical concerns ahead of key talks
Trump said on Monday that both Kyiv and Moscow will have to cede land to end the war. European leaders and Ukrainian President Volodymyr Zelenskiy plan to speak with Trump on Wednesday amid fears that Washington might dictate unfavorable peace terms to Kyiv.
In the current context, market performance will depend on the ability of major powers to reach sustainable agreements that maintain long-term economic stability. Although current optimism is strongly supported by recent agreements and multiple positive indicators, it is still important to remain vigilant and cautious, as any unexpected setback in negotiations could very quickly reverse investor sentiment worldwide.
GCN.com/Reuters