This was CNBC’s live blog covering European markets.
European stocks closed higher Wednesday amid optimism that U.S. President Donald Trump’s 25% duties on Canada and Mexico could be relaxed, and that German fiscal rules will be reformed to allow higher defense and infrastructure spending.
The Stoxx 600 index closed 1% higher, following the broad downturn in global equities on Tuesday on tariff concerns. The Stoxx autos index, which tumbled nearly 6% in the previous session, rebounded by 2.4%. Utilities and food and beverage were among the sectors in negative territory.
German stocks were the top performers regionally, with Frankfurt’s DAX index closing up 3.5%. Top gainers included construction firm Hochtief, up 15.5%, manufacturer Kion Group, up 20%, the country’s biggest lender Deutsche Bank, up 12.4%, and Siemens Energy, up 8.6%. Regional defense names also continued their recent rally, with the Stoxx Aerospace and Defense index rising 2.7%.
On Tuesday, Germany’s conservative alliance and the Social Democratic Party — the two groups expected to form the next coalition government following last month’s election — agreed to try to reform the constitutional debt brake system in order to enable defense spending in excess of 1% of GDP. Friedrich Merz, widely billed as likely to become the next chancellor of Europe’s largest economy, said they would also seek to create a 500 billion euro ($529 billion) credit-financed special infrastructure fund over ten years.
Alterations or exemptions to the debt brake system have been seen as crucial as a way to allow fiscal loosening to boost Germany’s struggling economy and increase military spending in-step with other European countries. The step remains politically contentious.
The yield on German 10-year bonds, seen as the euro zone benchmark, was 24 basis points higher at 2.723% following the news. The 2-year yield jumped 15 basis points.
The euro extended its late Tuesday gains by another 0.84% against the U.S. dollar, reaching its highest level for four months, before climbing down from those highs to trade up 0.77% against the greenback.
“At this stage, it looks as if Germany will run budget deficits comfortably over 3% of GDP over the next couple of years rather than keeping the deficit at around 2.5% as we had previously assumed,” Andrew Kenningham, chief Europe economist at Capital Economics, said in a Tuesday note.
He said the German announcement showed Merz was “prepared to act decisively” on the economy, but that the additional borrowing that will be needed to finance the extra spending would put upward pressure on Bund yields.
Elsewhere, the introduction of fresh U.S. tariffs has been rattling global market sentiment amid concerns they will reignite inflation and escalate a global trade war.
Wall Street has seen two days of declines as 25% duties on Canada and Mexico went into effect on Tuesday, as well as an additional 10% tariff on Chinese goods. All three countries have announced retaliatory measures.
U.S. stock futures rose overnight, however, after U.S. Commerce Secretary Howard Lutnick said Trump “probably” will announce tariff compromise deals with Canada and Mexico on Wednesday.
Europe stocks close higher
European stock markets closed provisionally higher on Wednesday with Germany’s Dax soaring 3.6%, France’s CAC 40 adding 1.56%. The U.K.’s FTSE 100 was one of the few laggards, closing lower by 0.04%.
The regional Stoxx 600 added 1%.
— Sawdah Bhaimiya
U.K. borrowing costs set for biggest daily rise since April 2024
U.K. borrowing costs soared on Wednesday marking its biggest daily rise since April 2024.
The yield on 10-year U.K. government bonds was last up 15 basis points to 4.688%.
— Sawdah Bhaimiya
Sterling rises after BOE’s Greene comments on monetary policy
The British pound last rose 0.5% to $1.286 against the U.S. dollar after Bank of England policymaker Megan Greene cautioned its likely monetary policy will need to remain more restrictive.
I’s “appropriate to maintain a cautious and gradual approach to removing monetary restrictiveness,” she said in comments reported by Reuters.
“It’s less likely inflation persistence will fade on its own accord,” Greene said, adding that the consumer price index impact of tariffs on UK inflation was much less clear with tariffs likely to push down growth overall.
— Sawdah Bhaimiya
Dow and S&P 500 open little changed
The Dow and S&P 500 were both little changed as Wednesday’s trading day kicked off. The Nasdaq Composite ticked 0.3% higher.
— Alex Harring
Germany’s Dax on course for biggest daily gain in over two years
Germany’s Dax index was up 3.5% at 1:40 p.m. London time, putting it on course for its biggest daily gain since November 2022.
It comes after German lawmakers from parties expected to soon form a new coalition government agreed to reform constitutional debt brake rules to permit a hike in defense spending.
Frankfurt-listed firms seeing the biggest gains on Wednesday afternoon included manufacturer Kion Group, up 18.9%, Hochtief, up 14.2%, and banking giant Deutsche Bank, which gained 11.3%.
— Chloe Taylor
German borrowing costs soar
The yield on Germany’s 10-year government bonds — known as bunds — surged on Wednesday, adding 21 basis points by 11:14 a.m. London time.
Shorter-term government borrowing costs also rose, with yields on 2- and 5-year bunds climbing 14 and 19 basis points higher, respectively.
It came after German lawmakers from parties widely expected to form a new coalition government agreed to work to reform the country’s debt brake rule in a bid to allow an increase in national defense spending.
— Chloe Taylor
LSEG CEO says listing challenges a global problem
London’s listing problem isn’t limited to the capital, with weakness in the U.S. and Asia too, according to the head of the London Stock Exchange Group.
According to EY, there were just 18 initial public offerings on the London Stock Exchange last year – eight of which came in a fourth quarter flurry.
But LSEG CEO David Schwimmer said it’s not a unique problem.
“We have seen on a global basis, a pretty subdued environment for IPOs, and that’s been in New York, that’s been in Hong Kong,” he told CNBC. “That’s got a lot of attention.”
— Zahra Tayeb
‘Game changing’: Analysts react to German debt brake proposals
Tuesday’s agreement between leading German political parties to prepare to loosen debt restrictions has been described by economists and analysts as a historic move — so long as it can be secured.
The move would allow billions in additional defense and infrastructure spending.
Jim Reid, Deutsche Bank’s head of global macro and thematic research, said in a Wednesday note the plan was for “one of the largest fiscal regime shifts in post-war history, perhaps with reunification 35 years ago being the only rival.”
“Everything you thought you knew about Germany’s economic prospects 3 months ago, or even 3 weeks ago, should be ripped up and you should start your analysis from fresh. This is game changing if it goes through.”
The deal’s open-ended borrowing room for defense and proposal for a 500 billion euro ($535.4 billion) special purpose vehicle is well beyond what had been expected, Reid continued — but noted that the Greens have not yet confirmed they will support the move, which is needed to gain a constitutional majority.
(From L) Bavaria’s State Premier and Leader of the conservative Christian Social Union (CSU) Markus Soeder, Leader of Germany’s Christian Democratic Union (CDU) Friedrich Merz, Germany’s Social Democratic Party (SPD) co-leader and parliamentary group leader Lars Klingbeil and Germany’s Social Democratic Party (SPD) co-leader Saskia Esken deliver a press statement at the Jakob Kaiser Haus parliamentary building in Berlin, on March 4, 2025.
“We do expect this bill to have a huge positive economic impact,” Louise Dudley, portfolio manager for global equities at Federated Hermes, told CNBC’s “Squawk Box Europe” on Wednesday.
“I think, you know, the German people wanted that, they’d come out 2024 quite negative, and that’s certainly going to have wide reaching impacts across the economy.”
ING’s global head of macro, Carsten Brzeski, said Tuesday that the joint announcement had also shown a “strong intention to establish a robust government coalition” that would not be undone by fiscal disputes as in the past.
“At face value, these two policy announcements would clearly benefit the German economy. A €500 billion infrastructure fund would address urgently needed investments, providing both short-term economic support and increasing long-term growth potential,” Brzeski said in a note.
“However, we wouldn’t rule out that the official coalition talks will still bring some expenditure cuts, which would lower the positive impact of the announced fiscal stimulus.”
Morgan Stanley analysts meanwhile said they expected the overall package to reach more than a trillion euros, and that they saw upside risks to their German economic growth forecast of 20 basis points in 2025 and 70 basis points in 2026.
— Jenni Reid
European banking sector heats up, with German lenders leading gains
Shares of Germany’s largest lenders perked up in early Wednesday trading, amid news of a potential debt policy overhaul in Europe’s biggest economy and positive momentum across the broader European banking sector.
The European banking index was up 3.21% at 8:42 a.m. London time, with Deutsche Bank up 9.13% and Commerzbank 6.98% higher. Outside of the European Union, stock of British bank Barclays added 6.77%.
Germany’s Friedrich Merz, widely expected to step in as the country’s next chancellor following February elections, on Tuesday announced plans for potential reform to loosen the country’s so-called debt brake fiscal policy on borrowing to allow higher defense spending — in a move that rippled into gains for Germany’s DAX and German bond yields early on Wednesday.
— Ruxandra Iordache
Europe stocks open higher, led by Germany
European stock markets opened higher Wednesday, with Germany’s DAX index jumping 2.8% after the parties expected to form the next government agreed a deal that could lead to increased spending on infrastructure and defense.
France’s CAC 40 and the U.K.’s FTSE 100 were 1.8% and 0.5% higher, respectively, with the pan-European Stoxx 600 index up by 1.2%.
— Jenni Reid
Chip giant ASML says its customers were ‘cautious’ in 2024, flags coming AI boost
Dutch semiconductor equipment maker ASML said in its annual report Wednesday that macroeconomic uncertainty had “led certain customers to remain cautious and control capital expenditure and cash flow more carefully in 2024.”
It also said geopolitical uncertainties had disrupted its supply chain because of reduced material availability and rising prices, and that inflationary pressures had hit its suppliers.
The report meanwhile calls artificial intelligence a “key driver for growth in the semiconductor industry,” but one creating shifts in market dynamics that was not benefiting all its customers equally, creating both opportunity and risk.
“Geopolitical announcements regarding export control restrictions and customer capital expenditure cuts created volatility in the investment community,” the company said.
ASML in January reported a rise in full-year 2024 net sales to 28.2 billion euros ($30 billion) from 27.5 billion euros, and a dip in net income to 7.6 billion euros from 7.8 billion euros.
— Jenni Reid
Adidas sales rise 19% in the fourth quarter, beating expectations
Adidas on Wednesday reported an uptick in fourth-quarter sales that exceeded expectations, as the retailer shakes off weakness in North America and China demand.
The German sportswear giant recorded a 19% increase revenues at neutral currency rates to 5.97 billion euros ($6.34 billion) in the three-month period, ahead of the 5.72 billion euros forecast by LSEG analysts.
Operating profit came in at 57 million euros in the fourth quarter compared to a loss of 377 million euros in the same period of last year.
— Karen Gilchrist
European markets: Here are the opening calls
European markets are expected to open higher Wednesday.
The U.K.’s FTSE 100 index is expected to open 56 points higher at 8,806, Germany’s DAX up 416 points at 22,733, France’s CAC 146 points higher at 8,176 and Italy’s FTSE MIB 403 points higher at 38,282, according to data from IG.
Earnings come from Sandoz on Wednesday, while data releases include finalized European services and manufacturing activity and Italian quarterly growth data.
— Holly Ellyatt
