By Shashwat Chauhan and Nikhil Sharma
(Reuters) -European shares rose on Monday, led by automakers, after a report that U.S. tariffs might be less aggressive than President-elect Donald Trump had threatened.
Europe’s premier index, , added 0.8%, hitting its highest level in more than two weeks.
Trump’s aides are exploring tariff plans that would be applied to every country but would only cover critical imports, the Washington Post reported.
“It looks as if officials are already preparing to water down the worst of Trump’s campaign promises by narrowing the scope of the tariffs,” said Kyle Chapman, FX markets analyst at Ballinger Group.
“That means a lower footprint on global trade, a smaller impact on US inflation, less restriction on the Fed’s cutting cycle, and a smaller negative growth shock for the global economy versus what the market had been preparing for.”
Shares of automobile sector, which have been pressured by fears of heavy tariffs, jumped 4.4% and were set for its best day in nearly two years.
China-exposed luxury companies also gained, with LVMH, Hermes, Kering (EPA:) and Richemont (SIX:) rising more than 4% each.
Technology advanced 3.5% led by ASML (AS:), ASMI and STMicroelectronics. Chipmakers got a boost after Microsoft (NASDAQ:) said on Friday it was planning to invest about $80 billion in 2025 to develop data centres to train AI models.
The data calendar for the week was heavy with inflation readings across Europe set to be released through the week, starting with a preliminary German reading that showed inflation rose more than expected last month.
Separate readings showed Germany’s service sector saw a slight uptick last month, while a broader euro zone reading showed overall activity contracted for a second straight month.
This week’s centrepiece would be the December U.S. nonfarm payrolls report on Friday, a crucial metric to assess the Federal Reserve’s interest rate path for 2025.
European equities lagged their U.S. counterparts in 2024, as concerns about a slowing economy, political turmoil in Germany and France and the threat of tariffs from the Trump administration made for an uncertain outlook.
Among individual movers, Rolls-Royce (OTC:) fell 3.3% after Citigroup (NYSE:) downgraded the rating on the British engineering company to “neutral” from “buy”.
Trading volumes are likely to improve this week as most market participants would return after two weeks of holiday-affected trading.
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