European markets opened on a strong note Tuesday, with the Stoxx 600 up over 1.2% by mid-morning, powered by a sharp rally in auto stocks. Optimism came after U.S. President Donald Trump suggested that temporary relief from his 25% auto tariffs could be on the table. This helped lift shares in major European automakers like Stellantis, Volkswagen, and suppliers like Valeo, as traders priced in a potential reprieve for the industry.
The sentiment boost came as Trump hinted Monday that some automakers might get more time to shift production to the U.S., calming fears over the previously imposed blanket tariffs. Although it’s still unclear how long this pause might last, markets took it as a sign of possible softening in the trade stance. Analysts say the auto sector is holding off on revising guidance for now, hopeful that the pressure might ease before any major strategic shifts are needed.
On the flip side, the luxury sector took a hit after LVMH reported an unexpected drop in Q1 sales, especially in its wines, spirits, and fashion divisions. The company’s shares fell as much as 8%, briefly losing their title as the world’s largest luxury brand to Hermès. The wider luxury sector also dipped, with companies like Kering and Burberry sliding on the news, reflecting investor nerves over consumer demand and geopolitical headwinds.
Elsewhere, U.K. labor market data showed a mixed picture: employment softened slightly, but wage growth stayed strong, with average pay excluding bonuses rising nearly 6%. Economists cautioned that the wage strength might be a lagging indicator, with recent tariff uncertainty potentially dampening hiring plans going forward. Meanwhile, the Fed downplayed the inflation risk from tariffs, calling it “transitory” and leaving the door open for future rate cuts.
Source: CNBC