Investor sentiment turned sharply positive across European markets on Monday, as the surprise U.S. decision to temporarily exempt certain tech products from punitive tariffs ignited a sector-wide rebound. The move triggered a swift market rotation into technology and energy stocks, pushing major indices significantly higher and reigniting interest in undervalued European equities.
European equities opened the week on a strong footing, with the pan-European Stoxx 600 index climbing 2% by mid-morning in London. Every sector was in positive territory, reflecting a broad-based risk-on mood. Technology stocks led the charge with a 2.5% gain, buoyed by the weekend announcement that several categories of electronic goods — including smartphones and computer components — would be spared from U.S. import duties, at least for now. This temporary reprieve provided immediate relief to a sector that has been under heavy pressure from trade uncertainty.
Oil and gas stocks were another standout, rising 3.5% despite widespread projections that crude prices could weaken in 2025. The resilience in the energy sector suggests investors are looking past short-term pricing concerns and instead focusing on longer-term cash flow generation and dividend stability. Meanwhile, banks added 2.9%, benefiting from the broader market uplift and growing expectations of a more stable geopolitical trade backdrop that could support loan growth and investment activity.
The backdrop to Monday’s rally is one of heightened volatility and geopolitical uncertainty. The erratic tariff policies of U.S. President Donald Trump have rattled markets for months, with April proving particularly brutal for European equities. After a strong start to 2025, the Stoxx 600 had dropped over 8% this month alone, underperforming even Wall Street’s S&P 500, which declined 4.43% during the same period. The rebound on Monday appears to be a recalibration, as investors reposition in anticipation of an earnings season that could offer upside surprises.
The latest U.S. trade development offers a glimmer of clarity. According to U.S. Customs and Border Protection, twenty categories of imported goods have been granted a temporary exemption from the new 125% tariff on Chinese imports and the 10% baseline tariff on imports from other countries. However, a 20% tariff on all Chinese goods remains intact. While the exemption is not permanent, it has paused what many feared was an imminent escalation of global trade tensions.
Adding intrigue to the unfolding narrative, Trump stated on Sunday that his administration would announce a new tariff rate on imported semiconductors within the week. This upcoming policy shift could have significant ramifications for tech supply chains and chipmakers globally, especially European firms with exposure to U.S. and Chinese markets.
Crucially, questions now turn to the longevity and scope of these exemptions. Will the U.S. continue to hold off on implementing its full reciprocal tariff regime? Will other nations retaliate or opt for negotiation? The European Union, notably, has paused its countertariffs for 90 days to engage in dialogue, signalling a willingness to de-escalate trade friction — at least temporarily.
This window offers investors a valuable opportunity to reassess positions. The combination of policy pauses, improving corporate earnings potential, and attractive valuations — particularly in Europe — may set the stage for a recovery rally. As geopolitical strategies play out, investor focus will likely sharpen on earnings resilience and macroeconomic adaptability, both of which favour well-diversified European sectors.
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