Europe: Shares close lower as US-EU trade deal draws mixed response

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 per cent to touch a four-month high on initial relief that prolonged negotiations yielded a deal that said a 15 per cent US tariff will be slapped on most EU goods – a significant reduction from the previously threatened 30 per cent rate.

However, the index closed 0.22 per cent lower at 548.76 as the deal quashed hopes for a zero-for-zero agreement and an average rate last year of around 2.5 per cent.

“While the 15 per cent tariff on most EU exports is lower than the threatened 30 per cent, it’s still a sharp jump from pre-2025 levels when many goods faced tariffs under 3 per cent, 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 per cent decline. The baseline tariff brings levies for the auto industry down from the 27.5 per cent faced before.

Spirits stocks Pernod Ricard and Anheuser-Busch inBev slipped 3.5 per cent and 3.6 per cent, respectively, as the trade deal did not contain any decision regarding the spirits sector.

Heineken dropped the most on the benchmark index, down 8.5 per cent, 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 US military equipment, without specifying an amount. The Stoxx defence sector ended 1.3 per cent lower.

The benchmark Stoxx index has gained about 19 per cent since the initial shock after Trump initially threatened tariffs in early April. It is now within 2.5 per cent of its March all-time high.

“We’re actually neutral on both US and European stocks, but on the short term if we have to think till the year end, we’re more positive actually on US versus European stocks,” said Anthi Tsouvali, multi-asset strategist at UBS Wealth.

On the flip side, energy sector stocks rose 1.1 per cent, as oil prices were boosted after the trade deal.

Technology shares advanced 0.6 per cent as ASML, the world’s biggest supplier of computer chip-making equipment, gained 4.9 per cent 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 Aug 1 tariff implementation deadline. REUTERS