European shares pulled back from a four-month high and settled Monday’s choppy session marginally lower as investors weighed the implications of a framework trade agreement between the United States and the European Union.
The pan-European STOXX 600 index rose as much as 1% to touch a four-month high on initial relief that prolonged negotiations yielded a deal that said a 15% U.S. tariff will be slapped on most EU goods – a significant reduction from the previously threatened 30% rate.
However, the index closed 0.2% lower as the deal quashed hopes for a zero-for-zero agreement and an average rate last year of around 2.5%.
“While the 15% tariff on most EU exports is lower than the threatened 30%, it’s still a sharp jump from pre-2025 levels when many goods faced tariffs under 3%, and is likely to add to inflationary pressures in the months ahead,” Lale Akoner, global market analyst at eToro, said.
Auto-related stocks were among top sectoral underperformers with a 1.7% decline. The baseline tariff brings levies for the auto industry down from the 27.5% faced before.
Spirits stocks Pernod Ricard and Anheuser-Busch inBev slipped 3.5% and 3.6%, respectively, as the trade deal did not contain any decision regarding the spirits sector.
European shares settle lower as investors gauge mixed earnings, EU-US trade progress
Heineken dropped the most on the benchmark index, down 8.5%, after the Dutch brewer said it was weighing all options to deal with growing tariff challenges long-term, including shifting manufacturing.
The deal also said EU member states will purchase U.S. military equipment, without specifying an amount. The STOXX defence sector ended 1.3% lower.
The benchmark STOXX index has gained about 19% since the initial shock after Trump initially threatened tariffs in early April. It is now within 2.5% of its March all-time high.
“We’re actually neutral on both U.S. and European stocks, but on the short term if we have to think till the year end, we’re more positive actually on U.S. versus European stocks,” said Anthi Tsouvali, multi-asset strategist at UBS Wealth.
On the flip side, energy sector stocks rose 1.1%, as oil prices were boosted after the trade deal.
Technology shares advanced 0.6% as ASML, the world’s biggest supplier of computer chip-making equipment, gained 4.9% on expectations that the sector might be exempted from tariffs. The healthcare sector was also marginally higher.
Investors face a week with several market-moving events including policy decisions from the Federal Reserve and Bank of Japan, earnings from “Magnificent Seven” tech companies like Apple and Microsoft, and the August 1 tariff implementation deadline.
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