Investing.com - European stock markets soared Wednesday, amid hopes for a compromise on U.S. trade tariffs on Mexico and Canada, with the German market leading the way after the country’s leaders agreed to overhaul borrowing rules to boost defence spending. However, the UK’s FTSE 100 declined.
The DAX index in Germany climbed 3.5% and the CAC 40 in France gained 1.6%. The FTSE 100 fell 0.1%.
President Trump’s decision to impose fresh U.S. tariffs of 25% on Canada and Mexico, as well as an additional 10% tariff on Chinese goods, has rattled global market sentiment amid concerns they will reignite inflation and escalate a global trade war.
All three countries have announced retaliatory measures.
Trump justified the need for these tariffs against America’s biggest trading partners during an address to Congress on Tuesday evening, calling for an end to what he saw as unfair trading practices.
“We’ve been ripped off for decades, and we will not let that happen any longer,” Trump said. “Tariffs are about making America rich again, making America great again.”
However, expectations are growing that these tariffs could still be removed after U.S. Commerce Secretary Howard Lutnick said Tuesday that Trump will “probably” announce tariff compromise deals with Canada and Mexico soon.
The compromises will likely be revealed as soon as Wednesday, Lutnick said on “Fox Business.”
Sentiment has also been boosted by the news that the parties hoping to form Germany’s next government agreed to create a €500 billion infrastructure fund and loosen fiscal rules in order to boost defence spending.
"The overall package is likely to reach more than €1trn and poses upside risks to our baseline for growth," analysts at Morgan Stanley said, in a note.
German cement maker Heidelberg (ETR: HDDG ) Materials (ETR: HEIG ) stock rose 13%, industrial services provider Bilfinger (ETR: GBFG ) jumped 24%, construction group Hochtief (ETR: HOTG ) advanced 14%, while defence manufacturer Rheinmetall (ETR: RHMG ) gained 4%.
The eurozone economy trod water again last month as a weak expansion in the bloc’s dominant services industry was overshadowed by a long-running downturn in manufacturing, a survey showed.
HCOB’s final composite Purchasing Managers’ Index for the bloc, compiled by S&P Global and seen as a good guide to overall economic health, held steady at January’s 50.2.
That matched a preliminary estimate and was only a tad above the 50 mark separating contraction from growth.
The ECB is widely expected to cut interest rates again on Thursday, reducing its key rate by another 25 basis points to 2.50%, in order to stimulate an economy that has been stagnant for nearly two years.
Looking at corporate earnings, Adidas (ETR: ADSGN ) gained after the German sportswear giant reported a hefty 19% rise in fourth-quarter sales, even as forecast slower profit growth in 2025, weighed by the absence of Yeezy-related sales, which contributed €200 million in 2024.
Dassault Aviation (EPA: AM ) stock rose over 4% after the French planemaker reported a rise in its full-year sales on Wednesday, as geopolitical tensions fuel defence spending.
Bayer (OTC: BAYRY ) stock also gained more than 4% after the German pharmaceutical and agricultural giant forecast an improvement in financial performance from 2026 onwards, following a challenging year marked by a decline in profits.
Flutter Entertainment (LON: FLTRF ) stock rose around 0.5% after the gaming company reaffirmed its full-year guidance, while also highlighting potential upside risks.
Oil prices fell slightly Wednesday, trading around five-month lows as traders digested plans by major producers to raise output in April as well as the potential for a global trade war.
By 11:50 ET, the US crude futures (WTI) dropped 4.3% to $65.33 a barrel, while the Brent contract fell 3.7% to $68.43 a barrel.
The oil market has been weighed by news that the Organization of the Petroleum Exporting Countries and allies like Russia, known as OPEC+, plans to proceed with a planned output increase in April, as well as the news of U.S. tariffs on Canada, Mexico and China.