EUROPEAN shares extended gains on Tuesday, led by defence stocks after U.S. President Donald Trump threatened additional sanctions on Russia, while relief from the reversal of tariffs on the region continued to boost sentiment.
The continent-wide STOXX 600 index rose 0.5% as of 0835 GMT. The benchmark closed 1% higher in the previous session after Trump extended the tariff deadline on the European Union to July 9 from June 1 to allow for talks between Washington and the 27-nation bloc.
Trump's Friday tariff announcement on the European Union had sparked extreme selling pressures across the global markets.
“The performance that we’ve seen over the last three days does suggest that markets no longer believe that Trump is serious about tariffs,“ said Daniela Hathorn, senior market analyst at Capital.com.
“But at the end of the day they (tariff announcements) are still affecting sentiment and that’s going to mean that markets do remain cautious going forward.”
The latest flip-flop on EU tariffs highlights the unpredictability of Trump's trade policies that have been shaking investor confidence in the U.S. economy and have put pressure on the U.S. dollar.
This phenomenon, coupled with the country's increasing fiscal challenges, is pushing investors away from U.S. assets to find other safe havens internationally.
On the day, Europe's defence index jumped 1.4% after Trump said he would recommend additional sanctions on Moscow, amid escalating tensions between Russia and Ukraine.
“Defence stocks have become the new value stocks, in the sense that it is a place where investors now feel comfortable to retreat to,“ Capital.com’s Hathorn said.
Financial services rose 1.1%, while industrials added 0.95% to boost the main index.
Euro zone government bond yields dipped on the day, lifting real estate by 0.9%.
In Germany, the DAX 40 hit a record high and was last up 0.4%. A recent survey indicated consumer sentiment is set to improve slightly heading into June, though cautious household spending may limit a robust recovery in Europe's largest economy.
Britain's FTSE 100 jumped 1% as investors returned following a holiday on Monday.
French benchmark index CAC 40 nudged up 0.1% after preliminary data showed inflation fell to its lowest level since December 2020 in May.
Prime Minister Francois Bayrou said he will unveil proposals in early July to get public finances under control, adding that “everyone will have to make an effort”.
Shares in FLSmidth rose 4.3% after Goldman Sachs raised the mining and cement technology supplier’s rating to “buy” from “neutral” on expectations of higher margins.
