FRANKFURT: European shares jumped on Thursday, with most indexes recording their biggest one-day gains since 2022, after US President Donald Trump’s pause on reciprocal tariffs for most trading partners prompted a huge relief rally following a brutal selloff.
The suspension of punishing tariffs on dozens of countries came less than 24 hours after they kicked in. In response, the European Union on Thursday paused its own countermeasures against around 21 billion euros worth of US imports.
The pan-European STOXX 600 leapt 3.7%, and major regional bourses jumped between 3% and 4.7%.
The benchmark index, as well as those in Germany Spain, and the UK recorded their best day since March 2022. France’s CAC 40 jumped 3.8%, its best day since October 2022.
“Today we’ve see markets sort of mechanically rebound across the continent, we’ve had participants reassessing and reducing some of the downside growth risks that we did have in terms of the outlook in Europe,” said Michael Brown, senior research strategist at Pepperstone.
The shock reprieve came as a welcome relief to investors after a steep cross-asset selloff, as uncertainty and fears of the broad hit to economic growth from US tariffs have seen markets at their most volatile in years.
The STOXX 600 has slumped about 9% since US reciprocal tariffs were announced on April 2. It is down over 13% from its March record close.
Uncertainty still remains, however, as Trump further hiked tariffs on Chinese imports. Broader 10% levies, and tariffs on automobile imports also remain in effect.
“A 10% levy on European imports is still very, very high and there’s absolutely no guarantee that a deal will be done, we’ve, built in 90 days worth of humongous uncertainty now,” Brown said.
A gauge of euro zone stock market volatility was still at elevated levels of 37 points, indicating traders still expect big swings in markets.
Money markets dialled back bets for a European Central Bank rate cut at its meeting this month, seeing around a 97% chance of rate cut in April from fully pricing it the day before. They are pricing in around three 25 basis point cuts by year-end.
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