On Monday, European stocks jumped to a four-month high. That blitz was right on the heels of America’s announcement of the first significant trade agreement between the United States and the EU. Photo: Paul M. Durenberger/Getty Images The Stoxx Europe 600 index soared 0.8%. That increase, driven by investor exuberance towards a recently announced deal that aims to improve trade ties between the world’s second- and third-largest economies, is not unusual.
U.S. President Donald Trump recently announced a new trade deal. It lowers EU tariffs on US goods coming into the EU down to 25%. Trump repeated the mantra that the deal would be “great for cars,” a slogan that hit home runs with European car makers. Needless to say, Europe’s carmakers welcomed the news with open arms. The Stoxx Europe autos index jumped, powering early advances with a spectacular gain of more than 1.5%.
Major European indices reflected positive momentum. The U.K.’s FTSE 100 index rose by 0.3%, while France’s CAC 40 climbed 1.1%. Germany’s DAX index was up 0.7%, including – as I write this morning – futures pointing to the index’s gaining a further 1% plus this morning. Futures linked to the Stoxx Europe 600 pointed to a robust open with forecasts of a 0.8% rise.
European car parts suppliers showed strong performance thanks to the trade agreement. French car parts supplier Valeo surged as much as 5% in early trading. This increase shines a spotlight on the news’ transformative effects on industries directly connected to it.
The agreement itself would signal a remarkable shift in trade policy. It promotes a more open and fair economic relationship between the U.S. and EU. Analysts expect this merger will open up new market avenues. This will accelerate economic growth on both sides of the Atlantic.