European negotiators head for Washington after Trump agrees Japan deal

Mr Trump struck a trade deal with Japan in exchange for a $550bn package of US-bound investment and loans

US president Donald Trump to Republican members of Congress at the White House. Mr Trump revived hopes for a trade deal with the European Union following an agreement with Japan. Picture: AP Photo/Julia Demaree Nikhinson

European shares climbed early on Wednesday, led by automobile stocks, after US president Donald Trump revived hopes for a trade deal with the European Union following an agreement with Japan.

European automobile stocks led a broad-based rally, rising 3.6%, tracking strength in Asian rivals. Carmakers such as Mercedes-Benz, Volkswagen, and Porsche gained between 7.4% and 5.1%.

Mr Trump struck a trade deal with Japan, lowering tariffs on auto imports and sparing Tokyo from punishing new levies on other goods in exchange for a $550bn (€468bn) package of US-bound investment and loans.

The Japan deal included reduced 15% tariffs for auto exports to the US, down from 25% earlier.

Meanwhile, the prospects of an EU-US trade agreement improved after Mr Trump said that EU representatives would come for trade negotiations on Wednesday. 

"The message is that things are negotiable," said RBC Brewin Dolphin's head of market analysis, Janet Lui, mentioning how Japan faced similar difficulties in reaching a tariff consensus with the U.S.

"The read across is there is potential to reach a trade deal that's lifting European markets across the board."

Among individual stocks, Temenos gained 18.1%, the biggest gainer in the STOXX 600, after the banking software company raised its full-year earnings forecast.

UniCredit rose 3.4% after the Italian lender posted higher-than-expected quarterly profit and raised its fiscal-year outlook.

Lonza rose 6.3% after the Swiss company topped core profit forecast.

Conversely, Nokia slumped 7.7%, pressuring media stocks, after the Finnish group lowered its guidance for 2025 comparable operating profit on Tuesday.

ASM International ASMI.AS fell the most in the benchmark index, down 9.3%, after the computer chip equipment maker reported second-quarter bookings below market expectations.

SAP fell 2.5% after the German software maker reported a positive second-quarter profit on cost cuts and increased demand.

Meanwhile, the latest earnings forecasts showed on Tuesday that the outlook for European corporate health has slightly improved.

On the day, Alphabet and Tesla will kick off the results season for the "Magnificent Seven" stocks.

Investors will also focus on euro zone consumer confidence flash for July later in the day.

Meanwhile Mr Trump said on Tuesday he would use import restrictions to force foreign suppliers to cut drug prices and that pharmaceutical companies would have a lot of problems if they did not agree to bring prices down.

Speaking at the White House at an event with Republican lawmakers, Trump pledged to reduce what consumers must pay for prescription drugs.