European shares near two-week highs

The benchmark STOXX index closed 1% higher and logged its biggest one-day gain in nearly a month

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 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, he said.

Most of the major bourses in the region, including Germany’s, 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%.