EUROPEAN EQUITIES UPDATE: Indices fly higher and Autos speed, as US-Japan trade deal boost sentiment

STOXX 600: +1.1%

• European bourses opened firmer across the board, and continued to trade higher throughout the morning - currently at session highs.


• Upside follows on from a strong APAC session, where sentiment was boosted after US President Trump announced three trade deals in one day with the Philippines, Indonesia and Japan, with the latter involving a USD 550bln investment in the US and 15% (prev. 24%) tariffs for Japanese goods.


• It seems that markets are optimistic of the potential implications of this Japan deal with the US, with the former managing to avoid the higher 25% tariff threat. A risk to this view could be that the EU would not back down as much as Japanese officials; Rabobank opines that the close proximity to PM Ishiba losing his Upper House majority meant he potentially accepted a less favourable deal than he would have otherwise wanted.


• Data docket has been non-existent today; focus now will be on any trade-related commentary out of the EU/US, ahead of the August 1st deadline.

Sectors: Positive

• European sectors hold a very strong positive bias, with only a couple of sectors residing in negative territory.


• Autos tops the pile and is currently the clear outperformer, largely benefiting from trade optimism after Japan finally struck a deal with US - optimism which stems from traders factoring in the potential benefits European automakers now have on pricing over Japanese autos. Consumer Products also benefit from the broader risk tone.


• Utilities are found at the foot of the pile; do note that Iberdrola is currently suspended. The Co. reported a beat on its H1 EBITDA figure, and announced a EUR 5bln share capital increase to cover financing needs for Co's upcoming investment plan. CNMV announced a “precautionary suspension with immediate effect”, due to the capital increase decision.

Majors: DAX 40 +1.1%, CAC 40 +1.5%

• The DAX 40 is on a strong footing today, despite losses in its largest weighted stock, SAP (-2.5%). The Co. reported a beat on its headline figures, though its Cloud Revenue was a little short of analyst expectations. The Co. also kept its 2025 outlook unchanged, despite highlighting ongoing tariff uncertainty. It is worth noting that several analysts saw the cloud company upping its FY Op. Profit view this quarter; a factor which may also be at play for the pressure today. Back to the broader DAX 40 index, upside today is thanks to gains across the autos sector, as traders digest the latest US-Japan deal.


• The CAC 40 is also firmer today, boosted by particular strength in automakers and Luxury brands more broadly. Key post-earning movers today: Eurofins (-0.5%) moves lower after it reported a slight miss on Revenue; Thales (-1%) also pressured after a headline miss, but did raise FY guidance.


• Other key stories today: UniCredit (+3.5%) gains after it reported a slight miss on Revenue though its Net Profit and NII were both stronger-than-expected, whilst also raising its FY25 revenue guidance. In terms of M&A, it was reported on Tuesday that UniCredit dropped its bid to acquire Banco BPM (-2.9%) due to its inability to secure government approval. Elsewhere, Equinor (-1%) is a little lower after missing on Revenue and Op. Income in Q2, with sentiment also hit after it flagged a near USD 1bln impairment. And in Finland, Nokia (-7.7%) has been hit after it lowered its 2025 op. profit guidance due to currency headwinds.

US Equity Futures: ES +0.4%, NQ +0.2%, RTY +1%

• Futures are modestly firmer across the board with some outperformance in the RTY, which builds on the strength seen in the prior session. The price action on Tuesday was characterised by outflows from favoured sectors (such as Tech), into recent underperformers (such as Value stocks).


• Docket ahead is light. US existing home sales are seen easing to 4mln in June from 4.03mln in May. Weekly MBA mortgage applications are also due. More focus on US earnings, notably Alphabet and Tesla.

23 Jul 2025 - 10:15- ForexEU Research- Source: Newsquawk