European Shares Reach Four-Month High on Trade Deal Optimism

European stocks rose on Monday, marking a four-month high, as a U.S.–EU trade deal brought relief to markets, helping to avoid the imposition of higher tariffs ahead of the August 1 deadline. The agreement boosted sentiment in key sectors, particularly pharmaceuticals and semiconductors.

Market Movement

• The pan-European STOXX 600 index rose 0.7% by 0815 GMT.
• Germany’s DAX increased by 0.6%, and France’s CAC 40 gained 0.8%.
• The UK’s FTSE 100 added 0.1%.

Trade Deal Details

The U.S.–EU trade deal imposed a 15% tariff on most EU goods, a significant reduction from the previously proposed 30%. In addition, the deal requires the EU to invest $600 billion in the U.S., though tariff rates on spirits remain under negotiation.

According to Anthi Tsouvali, multi-asset strategist at UBS Wealth, the deal is positive for markets as it removes a lot of uncertainty. European companies now have clarity on the trade situation, which had been clouded by tariff concerns.

The STOXX 600 index is now just 1.8% away from its all-time high reached on March 4, marking a 19.5% rebound from its trough in April.

Sector Performance

• Pharmaceutical stocks, benefiting from the EU-U.S. trade deal, saw their best performance in one month. Major pharma stocks like Novo Nordisk and Roche rose 0.4% and 1.4%, respectively.
• Automobile stocks also performed well, rising 2 months high, as the new deal reduced tariffs on auto exports from 27.5% to 15%. Stellantis and Volvo shares saw modest gains.
• On the other hand, spirits stocks underperformed, with Pernod Ricard and Anheuser-Busch InBev slipping 1.4% and 1.3%, respectively, due to the lack of a decision regarding the spirits sector in the trade deal.
• Heineken dropped 4.3%, as the company explored options to mitigate the long-term impact of tariffs, including shifting manufacturing.

Semiconductor Stocks Surge

• ASML, the world’s biggest supplier of computer chip-making equipment, surged 4.2%.
• Besi and ASM International were among the top gainers, with 5.5% and 3.8% increases, respectively, as chipmakers benefited from the overall market optimism.

Looking Ahead: Key Events

This week holds significant events that investors will closely monitor:

• Policy decisions from the Federal Reserve and the Bank of Japan.
• Earnings from several major companies, particularly from the “Magnificent Seven” tech stocks.
• The August 1 tariff deadline remains a key event for market sentiment.

The U.S.–EU trade deal has clearly helped buoy investor sentiment, especially in sectors like pharmaceuticals, automobiles, and technology, despite concerns over spirits and other industries facing tariffs.