European Markets Rally Amid Tariff Optimism and Tech Surge

European markets surged as optimism rose over reports suggesting lighter U.S. tariffs, boosting the automobile sector. STOXX 600 reached its highest level in weeks, and tech stocks soared on Microsoft’s AI investment. Investors brace for key economic data as trading volumes recover post-holiday season.

European markets enjoyed an optimistic rally on Monday, closing higher driven by a report suggesting U.S. tariffs could be less impactful than feared, offering a boost to the automobile sector. The STOXX 600 climbed 0.9%, marking its highest point in over two weeks.

Major indices across the continent saw significant gains, with France's CAC 40 rising 2.2%, Germany's DAX increasing 1.5%, and Spain's IBEX 35 climbing 1.3%. The automotive sector led the charge, surging nearly 3%, its strongest rise in more than a year. This uptick was influenced by a Washington Post article indicating President-elect Donald Trump's team might implement targeted tariffs on essential imports, potentially easing pressure off European car manufacturers, despite Trump's subsequent denial.

In addition to automotive gains, luxury brands with deep ties to China, including LVMH, Hermes, Kering, and Richemont, also experienced stocks rising by 2.4% to 4.5%. The technology sector gained 3.9%, propelled by Microsoft's announcement of an $80 billion investment in AI data centers by 2025. As the week unfolds, investors are focusing on crucial economic data, specifically the December U.S. nonfarm payroll report, which will be pivotal in determining the Federal Reserve's interest rate decisions for 2025.

(With inputs from agencies.)