Europe midday: Shares rally as EU moves towards US trade deal

(Sharecast News) - European stockmarkets rallied on Wednesday as European Union lawmakers reached a provisional agreement to remove some import tariffs on US goods, as part of the trade deal signed last summer and ahead of a deadline that would have seen auto tariffs rise.

The pan-regional Stoxx 600 index was up 0.55% to 614 at 1147 BST with all major bourses higher. Germany's DAX rose 0.57%, France's CAC 40 0.71% and the UK's FTSE 0.11%.

European Commission officials had paused ratification of the deal after the Supreme Court ruled US President Donald Trump's so-called reciprocal tariffs implemented last April were illegal. In response, Trump imposed a new, temporary 10% global levy in February.

A federal trade court also ruled earlier this month that Trump did not have the authority to impose that levy. He later threatened new 25% tariffs on EU car imports if the EU didn't implement the agreement by July 4.

In Britain, official flash data showed a surprise fall in inflation to 2.8% in April compared with forecasts of 3% although most analysts expect this to change later in the year when the energy shock caused by the war kicks in to prices.

Yields on US bonds continued to rise as US President Donald Trump's war of choice on Iran showed no signs of a resolution, even as he made his oft-repeated claim that the conflict would end "very quickly".

The 30-year Treasury yield above 5.19%, its highest level in 18 years, while the 10-year - a key benchmark for mortgage rates and other borrowing costs - climbed toward 4.69%.

In Japan, the 10-year yield neared 2.80%, the highest level in nearly 30 years, triggering fears of repatriation as the government could borrow more money to mitigate the impact of higher energy prices.

The country is the world's biggest holder of US debt holding at least $1trln in treasury securities.

Traders are worried that the inevitable inflationary impact from higher energy costs due to the conflict will see central banks globally raise the cost of borrowing.

"It's the same story, different day. Trump yesterday first called off an attack on Iran, then said he would resume strikes if they can't agree on a deal," said Swissquote analyst Ipek Ozkardeskaya.

"Alas, geopolitical uncertainties continue. Traffic through the Strait of Hormuz remains at a near standstill, world oil inventories continue tightening, and oil prices keep rising. The latter fuels global inflation expectations and pushes global yields higher on rising bets that central banks may have to fight price pressures despite the worsening economic outlook."

In equity news, Euronext shares were up as the company reported better-than-expected first-quarter earnings.

Marks & Spencer rose after the UK food and clothing retailer forecasting profit growth this financial year after 2025/26 earnings were hit by a cyber hack the led to supply disruption.

Shares in RS Group surged after the industrial and electrical products distributor launched a £100m share buyback programme following a "resilient" full-year performance.

Reporting by Frank Prenesti for Sharecast.com