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European equity markets rallied on Monday, driven by renewed optimism over the state of global trade after weekend talks between the United States and China yielded signs of a potential breakthrough in their months-long tariff war.
As of 03:02 ET (07:02 GMT), the DAX index in Germany jumped 1.8%, the CAC 40 in France gained 1.3%, and the FTSE 100 in the U.K. climbed 1%, as investor sentiment turned firmly positive.
Trade Talks Spark Risk-On Sentiment
The White House announced Sunday that a trade agreement had been reached with China, following days of negotiations. Chinese officials echoed the positive tone, stating that both sides would release a joint statement later on Monday.
While the details of the agreement remain sparse—and neither party has disclosed any changes to the existing tariffs of over 100% imposed last month—the absence of confrontational rhetoric and the apparent willingness to continue dialogue have been interpreted by markets as a clear step toward de-escalation.
The development comes on the heels of positive geopolitical signals elsewhere. A ceasefire between India and Pakistan appears to be holding, and Ukrainian President Volodymyr Zelenskiy announced plans to meet with Russian President Vladimir Putin in Turkey on Thursday, offering hope of diplomatic progress on multiple fronts.
ECB in Focus Ahead of Growth, Inflation Data
With Monday’s European economic calendar relatively light, investor attention will shift to the upcoming first-quarter GDP and inflation figures for the eurozone. These readings will provide further clues ahead of the European Central Bank’s policy decision in early June.
The ECB has already implemented seven rate cuts over the past year, as inflation pressures ease. Financial markets now assign a 90% probability to another rate cut in June, with the potential for further easing in the second half of the year.
UniCredit Delivers Record Q1 Profit
On the corporate front, UniCredit (BIT:CRDI) posted a record first-quarter net profit of €2.8 billion, an 8.3% increase year-over-year. Strong trading revenue and fee income helped offset a decline in net interest margins, as lower rates began to impact lending profitability. Shares in the Italian lender rose in early trading.
Salzgitter Weighed by Weak Demand
In contrast, German steelmaker Salzgitter (ETR:SZGG) reported weaker-than-expected Q1 earnings, citing continued macroeconomic weakness in Europe, especially in Germany. Lower industrial output and demand for steel products weighed on both production and processing segments. The company did not revise its full-year guidance but signaled caution for the coming quarters.
Outlook
Investors will be watching for the joint statement from U.S. and Chinese officials later today, as well as key eurozone data releases due this week. A confirmed de-escalation in global trade tensions could further bolster equities and risk assets, while inflation and growth figures will help shape expectations for the ECB’s next move.
