European markets climbed on Tuesday amid cautious optimism that there could be some relief from U.S. President Donald Trump’s tariffs. By 11:40 a.m. in London, the regional Stoxx 600 index was up 1%, with nearly all sectors trading in positive territory. The auto sector led gains, climbing 1.95%, after Trump hinted at easing his 25% auto tariffs, raising hopes of a broader industry reprieve.
Europe’s Stoxx 600 autos and parts index surged 2.5%, leading broader regional gains. Trump’s remarks about helping original equipment manufacturers (OEMs) adapt to the new tariffs raised hopes for an industry reprieve. The Trump administration had recently imposed a 25% tariff on foreign cars, with additional tariffs on some auto parts expected by May 3.
Analysts are hopeful that the peak of tariff-related concerns may be over. Shares of luxury conglomerate LVMH dropped nearly 7% after reporting a decline in first-quarter sales. At one point, Hermès briefly surpassed LVMH’s market capitalization, highlighting the intense competition in the luxury sector.
LVMH’s market capitalization was last recorded at €248.2 billion against Hermès’ €246 billion.
Markets rise on tariff relief hopes
LVMH reported a 3% year-on-year fall in first-quarter sales, missing analyst expectations.
The company cited weaker demand in both the U.S. and China for its wines and spirits, particularly cognac, as well as fashion and leather goods. Citi analysts expressed little optimism for a near-term recovery, given ongoing global economic uncertainty and volatile trade policies from the U.S. Analysts at Jefferies subsequently reduced their target price on LVMH stock from €670 to €510. The U.K. employment rate rose slightly to 75.1% between December 2024 and February 2025.
However, average annual wage growth, excluding bonuses, came in at 5.9%, slightly up from 5.8% in the previous period. Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, commented that labor market activity was sluggish due to concerns over tax and tariff costs. Ashley Webb, U.K. economist at Capital Economics, noted that while the jobs market softened, wage growth remained robust.
Federal Reserve Governor Christopher Waller described the inflation impact from the tariffs as “transitory,” suggesting that the economic effects might be short-lived. Nevertheless, market participants’ concerns about the longer-term impacts of U.S. trade policies persist. Overall, the European markets started the week positively, driven by potential tariff relief and despite ongoing challenges in the luxury sector.
Market sentiment remains cautiously optimistic as investors keep an eye on further developments in U.S. trade policies and their potential ramifications for global markets.
