Europe rallies like it’s 2020 as markets cheer tariff truce
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European markets staged a powerful rebound on Thursday, mirroring the kind of frenzied upside last seen during the early pandemic shocks of March 2020. The trigger: a 90-day suspension of most U.S. tariffs, announced by President Trump, which sparked a global risk-on wave and sent EuroSTOXX50 futures up 8%, marking the largest one-day gain in over four years.
The relief rally was broad-based, with banks — previously pressured by recession fears and potential deterioration in loan books — leading the charge. Futures on the banking sector surged 11%, highlighting renewed investor appetite for cyclicals. The optimism also lifted autos, tech, and industrials, with projected gains of over 10% for Stellantis, BMW, Prysmian, STMicroelectronics, Infineon, Société Générale, Deutsche Bank, Siemens Energy, and Orsted.
While the immediate mood was euphoric, uncertainty continues to cast a long shadow. The trade truce notably excludes China, which remains the target of escalated U.S. tariffs now totaling 125%. This unresolved tension leaves markets exposed to further volatility in either direction. U.S. equity futures were down nearly 1% in premarket trading, suggesting a degree of cooling after Wall Street’s sharp rally the day before — capped by a 12% surge in the Nasdaq.
In Frankfurt, early trading reflected this cautious tone. Tesla, despite gaining over 22% in the previous session, was down 1.5%, along with modest pullbacks in the other Magnificent Seven tech names. Still, the tone in Europe remained decisively risk-on.
Stock-specific news played a secondary role, overshadowed by the macro narrative. Tesco issued a warning on profits due to heightened competition in the UK grocery market, but shares were still expected to rise at the open. Meanwhile, Barry Callebaut cut its annual volume guidance amid extreme volatility in cocoa markets, adding a defensive note to an otherwise bullish session.
With tariff relief setting the stage, Europe’s bounce underscores just how tightly global markets are tethered to geopolitical developments. While short-term sentiment has flipped positive, traders remain on alert for further policy shifts and potential aftershocks from the ongoing U.S.–China standoff.
The relief rally was broad-based, with banks — previously pressured by recession fears and potential deterioration in loan books — leading the charge. Futures on the banking sector surged 11%, highlighting renewed investor appetite for cyclicals. The optimism also lifted autos, tech, and industrials, with projected gains of over 10% for Stellantis, BMW, Prysmian, STMicroelectronics, Infineon, Société Générale, Deutsche Bank, Siemens Energy, and Orsted.
While the immediate mood was euphoric, uncertainty continues to cast a long shadow. The trade truce notably excludes China, which remains the target of escalated U.S. tariffs now totaling 125%. This unresolved tension leaves markets exposed to further volatility in either direction. U.S. equity futures were down nearly 1% in premarket trading, suggesting a degree of cooling after Wall Street’s sharp rally the day before — capped by a 12% surge in the Nasdaq.
In Frankfurt, early trading reflected this cautious tone. Tesla, despite gaining over 22% in the previous session, was down 1.5%, along with modest pullbacks in the other Magnificent Seven tech names. Still, the tone in Europe remained decisively risk-on.
Stock-specific news played a secondary role, overshadowed by the macro narrative. Tesco issued a warning on profits due to heightened competition in the UK grocery market, but shares were still expected to rise at the open. Meanwhile, Barry Callebaut cut its annual volume guidance amid extreme volatility in cocoa markets, adding a defensive note to an otherwise bullish session.
With tariff relief setting the stage, Europe’s bounce underscores just how tightly global markets are tethered to geopolitical developments. While short-term sentiment has flipped positive, traders remain on alert for further policy shifts and potential aftershocks from the ongoing U.S.–China standoff.