European Stocks Gain Amid German Debt Deal, U.S.-EU Trade War Looms

European stock markets edged higher on Monday, supported by optimism over a historic German debt deal, which investors hope will revive economic growth in Europe.

• DAX (Germany): +0.4%
• CAC 40 (France): +0.3%
• FTSE 100 (UK): +0.1%

Germany’s Debt Expansion Plans Drive Optimism

• Friedrich Merz, expected to be Germany’s next chancellor, struck a deal with the Greens to increase state borrowing for defense and infrastructure.
• This move marks one of the biggest fiscal shifts since 1989 and would require a constitutional amendment.
• The Bundestag vote on Tuesday needs a two-thirds majority for approval.
• DAX Year-to-Date Gain: +15% as investor confidence surges.

U.S.-EU Trade War Escalates

• The EU retaliated against Trump’s 25% tariffs on steel and aluminum, imposing countermeasures on U.S. goods like clothing, alcohol, and industrial products.
• In response, Trump threatened a 200% tariff on champagne and European spirits.
• ECB Vice President Luis de Guindos warned that Trump’s trade policies have clouded global economic outlooks.

AstraZeneca’s $1 Billion Biotech Acquisition

• AstraZeneca (LON:AZN) stock fell 0.8% after it announced plans to acquire EsoBiotec for up to $1 billion.
• The deal aims to strengthen its cell therapy portfolio, particularly in cancer and autoimmune diseases.

Oil Prices Rise on U.S. Strikes Against Houthis

• Brent crude: +0.9% to $71.18/barrel
• WTI crude: +0.9% to $67.50/barrel
• The U.S. launched airstrikes on Yemen’s Houthi rebels, responding to attacks on Red Sea shipping lanes.
• The Red Sea accounts for 15% of global shipping, and further conflict may disrupt supply chains.

Upcoming Geopolitical Developments

• Trump to speak with Putin on Tuesday, seeking progress on a Russia-Ukraine ceasefire.

Despite trade tensions and geopolitical risks, European stocks remain buoyant, with Germany’s fiscal reset offering potential economic support for the region.