European Stocks Rally 5 Days on M&A Wave, Trade Tensions Fade

European stock markets have experienced a five-day rally, driven by a series of merger and acquisition announcements that have overshadowed concerns over trade tensions. The recent wave of corporate deals has injected optimism into the market, with investors focusing on the potential benefits of these strategic moves rather than the ongoing trade uncertainties.

The STOXX Europe 600 Index closed 0.5% higher, marking its fifth consecutive day of gains, the longest winning streak since January. The German DAX index rose 0.1%, nearly recovering all of its losses since U.S. President Trump announced retaliatory tariffs on April 2. The Portuguese PSI 20 index fell 1%, weighed down by Galp Energia SGPS SA's performance, while the Spanish IBEX 35 index narrowed its earlier gains to close 0.7% higher. Both countries were affected by widespread power outages, but their stock markets operated normally.

Banking stocks performed well, boosted by a 5.2% rise in Banca Generali SpA after Mediobanca SpA unexpectedly proposed a €6.3 billion ($7.2 billion) acquisition of the wealth management company. Merck rose 1.3% after agreeing to acquire SpringWorks Therapeutics Inc. to expand its healthcare business. Additionally, Deliveroo Plc's stock surged 17% following DoorDash Inc.'s proposal to acquire the food delivery company for $3.6 billion.

Despite the positive momentum, the STOXX 600 Index has not fully recovered from its April losses due to ongoing concerns about U.S. trade policy following Trump's tariff announcement. Investors are hoping that Trump's stance will soften as countries negotiate trade agreements with Washington, potentially leading to a reduction in some of the higher tariffs.

Traders anticipate that the European Central Bank will further ease monetary policy to mitigate the economic impact of U.S. tariffs. The recent rally in European stocks highlights the market's resilience in the face of trade uncertainties, driven by strategic corporate moves and investor confidence in long-term growth opportunities. The focus on mergers and acquisitions has provided a much-needed boost to market sentiment, as investors look beyond short-term trade issues and focus on the potential benefits of these strategic deals.