European stock markets surged on Wednesday, lifted by renewed optimism following a U.S.-Japan trade deal and as the region’s corporate earnings season gathered momentum.
As of 03:05 ET (07:05 GMT), Germany’s DAX rose 0.8%, France’s CAC 40 climbed 1.3%, and the U.K.’s FTSE 100 advanced 0.4%.
U.S.-Japan Trade Agreement Boosts Market Confidence
Earlier Wednesday, President Donald Trump announced a significant trade deal with Japan, which will impose a 15% tariff on Japanese exports. He also said Japan has committed to investing $550 billion in the U.S., with the U.S. receiving 90% of the profits.
Although the 15% levy is less than the previously suggested 25%, it still contradicts Japan’s earlier request for a full exemption. The new tariffs are expected to take effect on August 1, aligning with the timeline for other pending U.S. tariffs targeting key trading partners.
News of the agreement sent Japan’s Nikkei stock index soaring over 3% to a one-year high, and also boosted hopes for a breakthrough in U.S.-EU trade talks, with EU officials headed to Washington for negotiations this week.
Earnings Season Kicks Off in Europe
In European corporate news, earnings reports began rolling in:
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UniCredit (BIT: CRDI) posted better-than-expected quarterly profits and raised its 2025 outlook, just a day after abandoning its takeover bid for Banco BPM (BIT: BAMI).
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Renault (EPA: RENA) reported flat second-quarter sales, with strong passenger car demand offset by a sharp drop in European van sales.
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Thales (EPA: TCFP) upgraded its 2025 sales growth forecast after reporting stronger first-half results, supported by increased European defense spending.
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Equinor (OL: EQNR), Norway’s energy major, saw a 13% year-over-year decline in Q2 profit due to falling oil prices, despite a rebound in gas prices.
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SAP (ETR: SAPG) delivered solid second-quarter results, driven by cost reductions, but did not raise its full-year outlook, disappointing some investors.
Across the Atlantic, market attention is turning to upcoming earnings releases from Tesla (NASDAQ: TSLA) and Alphabet (NASDAQ: GOOGL)—two of the so-called “Magnificent 7” tech stocks powering much of the recent rally on AI-driven enthusiasm.
Eurozone Data in Focus
Investors are also awaiting the eurozone’s June consumer confidence report, expected later today, ahead of the European Central Bank’s policy decision on Thursday.
Analysts largely anticipate the ECB will hold rates steady at 2%, following a 25 basis point cut last month, which was the eighth cut in the past year.
Oil Prices Rebound on Trade Hopes and Inventory Drop
Crude oil prices edged higher Wednesday, buoyed by optimism over the U.S.-Japan trade deal and a larger-than-expected drop in U.S. crude inventories.
As of 03:05 ET, Brent crude futures were up 0.2% to $68.74 a barrel, while U.S. West Texas Intermediate (WTI) futures rose 0.3% to $65.48. Both benchmarks had been under pressure, falling in the previous three trading sessions.
Markets viewed the trade agreement as a positive signal for global economic activity, potentially translating into higher energy demand.
Adding to the bullish sentiment, data from the American Petroleum Institute (API) showed that U.S. crude stockpiles fell by 577,000 barrels for the week ending July 18—a sharp reversal from the 19.1 million-barrel build reported the week before.
This unexpected drawdown is seen as a potential indicator of rising fuel demand during the peak summer travel season.
