By Sanchayaita Roy, Twesha Dikshit and Ragini Mathur
(Reuters) -European shares closed near two-week highs on Wednesday, led by automakers, as investors anticipated a possible agreement between the United States and European Union to soften the blow of growth-denting tariffs.
Futures tracking the pan-European STOXX 600 index got a further boost and were last up 2.1% as EU diplomats said the bloc and Washington were headed for a potential trade deal including a 15% U.S. baseline tariff on European imports – half the level U.S. President Donald Trump had threatened.
Negotiations between the two economies have lagged in recent weeks, and investors are keen for an agreement before the August 1 deadline. The European Commission is planning to unveil counter-tariffs if the talks fail.
The benchmark STOXX index <.STOXX> closed 1% higher and logged its biggest one-day gain in nearly a month, after Japan struck a trade deal with the U.S., sparking a rally in automobile stocks earlier in the day.
“One of the premises underlying global markets is that once tariffs are implemented, they will not be as negative as feared,” said Steve Sosnick, chief market analyst at Interactive Brokers.
“From the European point of view, it’s understandable why that would be perceived as good news, because it’s reasonable to think that there will be some sort of negotiation between the U.S. and the EU to arrive at a deal”.
Most of the major bourses in the region, including Germany’s DAX, France’s CAC 40 along with main stock indexes in Italy, rallied more than 1.3%.
European automobile stocks surged 3.7% and logged its biggest daily rise in close to a month, tracking a steep rally by some Asian rivals.
European carmakers such as Stellantis, Mercedes-Benz, Volkswagen and Porsche gained between 6.1% and 7.3%.
Earnings were also on the radar, with technology stocks bogged down by a 4.1% slide in SAP as investors were disappointed the software company held off on increasing full-year targets after reporting higher quarterly sales and earnings.
ASM International dropped the most on the benchmark index, down 10.4%, after the computer chip equipment maker reported second-quarter bookings below market expectations.
UniCredit rose 3.6% after the Italian lender posted higher-than-expected quarterly profit and raised its fiscal-year outlook, a day after a clash with the government prompted Italy’s second biggest bank to ditch its takeover bid for rival Banco BPM.
Nokia, meanwhile, slumped 7.6% after the Finnish group lowered its guidance for 2025 comparable operating profit, while SSAB’s slid 9% after earnings fell more than expected in the second quarter.
Spanish stocks were limited by a 4.7% drop in Iberdrola after the utilities company raised 5 billion euros ($5.87 billion) to help pay for a big rise in investments in power grids in Britain and the United States.
($1 = 0.8515 euros)
(Reporting by Sanchayaita Roy, Twesha Dikshit, Ragini Mathur and Johann M Cherian in Bengaluru; Editing by Mrigank Dhaniwala, Rashmi Aich and Joe Bavier)
