European Stocks Rebound 0.4% on US-UK Trade Deal

European stock markets rebounded on Thursday, halting a two-day decline, as investor confidence was boosted by the news of a trade agreement between the United States and the United Kingdom. The Stoxx Europe 600 index closed 0.4% higher, with the Euro Stoxx 50 index reaching its highest closing level since April 2, when President Donald Trump announced the "liberation day" tariffs. Cyclical stocks, including those in the industrial, technology, tourism, retail, and banking sectors, led the gains, while defensive sectors such as utilities, healthcare, and real estate lagged behind.

Chip stocks, including ASML, rose on reports that the White House is planning to lift some of the chip export restrictions imposed during the Biden administration. Siemens Energy climbed 3.3% after the company stated that the impact of tariffs would be limited.

President Trump, speaking from the Oval Office, expressed his delight in announcing a "breakthrough" trade agreement with the United Kingdom. This news bolstered market expectations of easing trade tensions, although he noted that the full details of the agreement would be negotiated over the coming weeks.

However, the European Union has proposed retaliatory tariffs on $1.08 trillion worth of U.S. goods if trade negotiations with the U.S. government fail. This proposal adds a layer of complexity to the trade landscape, as the market's initial optimism may be tempered by the potential for further trade disputes.

Stephan Kemper, Chief Investment Strategist at BNP Paribas Wealth Management, commented that while the agreement with the UK is a positive development for market sentiment, the reality may be more complex. He noted that the current environment is akin to being in the eye of a storm, with profit margins and earnings per share ultimately expected to be impacted.