European Equities Edge Higher Amid Trade Deal Optimism and Corporate Results

European equities saw a modest uptick on Tuesday, lifted by corporate earnings reports, notably in EssilorLuxottica, and optimism surrounding the newly inked trade deal between the U.S. and the European Union.

Market Performance

• Pan-European STOXX 600 index: Rose 0.5% by 0815 GMT.
• Germany’s DAX and France’s CAC 40: Both added nearly 1% each.

The STOXX 600 index reached a four-month high on Monday, rising 0.9%, but reversed course by the end of the day, closing approximately 0.2% lower. Investors remained cautious as they evaluated the potential impact of the 15% tariff imposed on most EU goods, significantly higher than pre-2025 levels.

U.S. Trade Deal and Global Tensions

The U.S.-EU trade agreement has prompted mixed reactions. U.S. President Donald Trump announced that a 15% to 20% “world tariff” would be extended to countries not engaging in separate trade deals with the U.S., further intensifying global tariff uncertainties.

Trade discussions were also ongoing between U.S. and China, with officials meeting on Monday to negotiate economic disputes and extend the tariff truce by three months.

Sector Performance

• Aerospace and Defence stocks rose 1.9%, as the new trade deal proposed zero-for-zero tariffs on aircraft and parts.
  • Airbus: Gained 1.9%
  • Safran SA: Rose 2.7%
• EssilorLuxottica: Shares jumped 6% after the eyewear group reported a rise in first-half operating profit, despite the negative impact of tariffs.
• Philips: The Dutch healthcare technology company surged 10.3%, as it revised down its tariff impact estimates following the U.S.-EU trade deal.

Stock Declines

• Inchcape: The car distributor saw a sharp 7.7% drop after posting a first-half profit decline attributed to the impact of tariffs.

Economic Data and Key Events Ahead

• Second-Quarter GDP Data: Investors are closely watching the release of GDP data from both the Eurozone and the U.S. on Wednesday, which will provide insights into the health of the global economy.
• Federal Reserve Rate Decision: The U.S. Federal Reserve’s upcoming rate decision is a key event this week, as markets anticipate its stance on future rate cuts or hikes.
• U.S. Jobs Report: The closely watched U.S. jobs report is due on Friday, which will offer more clarity on the strength of the labor market and potential economic growth moving forward.

Conclusion

While European markets showed positive movement following trade deal optimism and strong corporate earnings, concerns about the broader impact of tariffs remain. Investors are now waiting for significant economic data and central bank decisions this week that could shape market direction in the coming months.