European equity markets rallied strongly on Wednesday, buoyed by renewed investor optimism following the announcement of a trade agreement between the United States and Japan, alongside an active earnings season across the region.
By 07:05 GMT, Germany’s DAX index had gained 0.8%, France’s CAC 40 climbed 1.3%, and the UK’s FTSE 100 increased 0.4%.
Trade deal between U.S. and Japan fuels confidence
Earlier in the day, U.S. President Donald Trump declared that his administration had secured a “massive deal” with Japan, imposing a 15% tariff on Japanese exports. Trump also highlighted that Japan would channel $550 billion in investments into the U.S., with “90% of the Profits” benefiting the American economy.
Although the 15% tariff is lower than the 25% initially proposed by Trump, it still counters Tokyo’s previous insistence on being exempt from U.S. tariffs. The new levy is expected to come into effect on August 1, coinciding with the rollout of Trump’s other tariffs targeting major global economies.
The announcement propelled Japan’s Nikkei index up over 3% to reach its highest point in a year. The positive sentiment has increased expectations that the U.S. and European Union might finalize a trade agreement before the looming August deadline, with EU representatives scheduled for further talks in Washington this week.
UniCredit boosts 2025 outlook amid earnings season
Across Europe, the quarterly earnings reporting season accelerated with several major companies releasing results.
Italy’s UniCredit (BIT:UCG) exceeded profit expectations for the quarter and raised its forecast for 2025, following its withdrawal of a takeover bid for Banco BPM (BIT:BAMI), Italy’s second-largest bank.
Renault (EU:RNO), the French automotive giant, recorded flat sales for the second quarter as a drop in van demand across Europe offset passenger car growth.
French defense and aerospace firm Thales (EU:HO) raised its sales growth forecast for 2025 after reporting increased first-half sales and profits, benefiting from rising military spending in Europe.
Norway’s energy company Equinor (TG:DNQ) reported a 13% year-on-year decline in second-quarter profit, weighed down by falling oil prices despite higher gas prices.
German software giant SAP (TG:SAP) posted a strong second quarter supported by cost reductions but refrained from raising its full-year guidance, disappointing some investors.
Meanwhile, investors in the U.S. are awaiting earnings later today from Tesla (NASDAQ:TSLA) and Alphabet (NASDAQ:GOOGL), parent company of Google, both key drivers of recent market gains fueled by AI optimism.
Eurozone consumer confidence awaited
Later in the session, market participants will focus on the release of June’s consumer confidence data for the eurozone, a key indicator ahead of the European Central Bank’s policy meeting on Thursday.
Analysts broadly expect the ECB to maintain its main deposit rate at 2%, following a 25-basis-point cut last month—the eighth reduction in a year.
Oil prices climb on trade deal and inventory drawdown
Oil futures rose on Wednesday, supported by optimism over the U.S.-Japan trade deal and a notable drop in U.S. crude stockpiles.
At 03:05 ET, Brent crude futures edged up 0.2% to $68.74 per barrel, while U.S. West Texas Intermediate crude rose 0.3% to $65.48 per barrel. Both benchmarks had fallen in the previous three sessions.
Investors view the trade agreement as a boost to global economic activity, which typically leads to higher oil demand.
Adding to the positive outlook, the American Petroleum Institute reported a surprise decrease of 577,000 barrels in U.S. crude inventories for the week ending July 18, reversing the previous week’s build of 19.1 million barrels.
This inventory decline points to a possible rebound in fuel consumption during the busy summer travel period.
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