The most significant driver behind the market rally was renewed hope for a trade agreement between the European Union and the United States. Comments from U.S. President Donald Trump suggesting the EU was returning to the negotiation table—just a day after a high-profile trade pact was sealed with Japan—lifted investor sentiment. That agreement, which includes a reduction in auto tariffs from 25% to 15%, also buoyed expectations that the U.S. may take a more conciliatory approach in its talks with Europe.
France’s CAC 40 led regional gains with a 1.3% jump, while the UK’s FTSE 100 extended its winning streak to a fifth consecutive session, edging 0.5% higher and hitting a new record high. Other European markets followed suit, driven primarily by auto and industrial stocks.
Automakers were the standout performers. The European auto sector index climbed 3.6%, mirroring gains seen earlier in Asia following the Japan-U.S. deal. Shares in key players such as Mercedes-Benz, Volkswagen, and Porsche soared between 5.1% and 7.4%, benefiting from the broader sentiment that global trade tensions may be thawing.
“The message is that things are negotiable,” noted Janet Lui, head of market analysis at RBC Brewin Dolphin. “Japan’s agreement demonstrates that a compromise on tariffs is possible, and that’s encouraging investors who are hoping for a similar breakthrough with the EU.”
Individual corporate results added further momentum. Temenos led the STOXX 600 with an 18.1% gain after the banking software company raised its full-year earnings guidance. Italian banking giant UniCredit climbed 3.4% following stronger-than-expected quarterly profits and an upgraded outlook for the rest of the year. Meanwhile, Swiss pharmaceutical firm Lonza jumped 6.3% after exceeding core profit forecasts.
However, not all sectors shared in the day’s gains. Finnish tech company Nokia slid 7.7% after slashing its 2025 operating profit forecast, dragging down the broader media and communications sector. Semiconductor firm ASM International dropped 9.3%, the steepest fall on the benchmark index, after it reported quarterly bookings that missed market expectations. German software heavyweight SAP also dipped 2.5%, despite posting a solid second-quarter profit driven by cost reductions and improved demand.
Beyond company earnings, economic data remained in focus. Investors awaited the euro zone's flash consumer confidence reading for July, which could offer additional insight into the bloc’s economic trajectory. Across the Atlantic, Alphabet and Tesla were set to report results later in the day, kicking off earnings season for the U.S. market’s so-called “Magnificent Seven” tech giants.
Despite some notable laggards, the mood in Europe’s financial markets turned decisively upbeat, with signs of improved corporate health and softening trade tensions providing fresh momentum for equities that had recently been under pressure.