Stock markets mostly extended gains Thursday as optimism grew that the European Union could soon strike a trade deal with the United States, following the Japan-US agreement.
Investors have benefitted in recent weeks from bets that governments will eventually hammer out pacts with Donald Trump ahead of the US president's August 1 deadline to avoid steeper levies.
“The positive sentiment generated by the trade deal agreed between the US and Japan continued to permeate the markets,” said AJ Bell investment director Russ Mould.
This was boosted further by “optimism surrounding trade talks between the US and EU”, said Joshua Mahony, chief market analyst at Rostro trading group.
On Wall Street, both the S&P 500 and Nasdaq set new all-time highs at the start of trading, although the Dow slid lower.
“There is underlying enthusiasm for more trade deals being struck before the August 1 deadline, and, once again, some relief grounded in the understanding that the reciprocal tariff rates for key trading partners may not be as onerous as advertised,” said market analyst Patrick O'Hare at Briefing.com.
London's FTSE 100 gained 0.8 percent, lifted also by a stream of robust earnings, including from consumer goods group Reckitt, mobile phone giant Vodafone and Lloyds bank.
Frankfurt rose, along with most other European stocks, as the European Union and Washington appeared close to a deal that would set a baseline 15-percent levy on EU goods, down from a threatened 30 percent.
Paris fell, however, dragged down by a drop in luxury stocks and disappointing earnings from fossil fuel giant TotalEnergies.
A European Commission spokesman said Thursday that he believed a trade deal with the United States is “within reach”.
According to multiple diplomats, the deal could waive tariffs on aircraft, lumber, pharmaceutical products and agricultural goods.
The bloc, however, is still forging ahead with contingency plans in case talks fail, with member states approving a 93-billion-euro ($109-billion) package of counter-tariffs on US goods.
Meanwhile, the European Central Bank left interest rates unchanged, as widely expected, as higher US tariffs hang in the balance.
In its rates announcement the ECB said that the economic environment remained “exceptionally uncertain, especially because of trade disputes”.
The euro failed to gain much traction following the rate decision, but it did perk up after ECB President Christine Lagarde said Thursday the bank was monitoring the dollar-euro exchange rate but had no target.
