European markets rose sharply at the open on Thursday, after U.S. President Donald Trump temporarily reversed course on tariffs.

The regional Stoxx 600 index was 7.04% higher shortly after the opening bell, with stocks across the board surging to place all individual sectors firmly in positive territory. Banking, tech and industrials stocks notched the biggest gains, surging 10%, 9.9% and 9.1%, respectively.

In a volatile week for markets that has been marked by sharp moves higher and lower, the pan-European Stoxx 600 ended the prior session down 3.5% at its lowest closing level since January 2024.

But later on Wednesday, Trump temporarily reduced new tariff rates on imports from most U.S. trade partners to 10% for 90 days — a sharp reversal from previous comments in which he insisted duties would not be lifted.

U.S. stocks rallied after Trump's announcement, with the S&P 500 soaring more than 9% during Wednesday's session to see its third-largest gain in a single day since World War II.

The Dow Jones Industrial Average jumped 7.87% — its biggest percentage advance since March 2020 — and the Nasdaq Composite jumped over 12%, notching its largest one-day jump since January 2001 and second-best day ever.

Deutsche Bank Research's George Saravelos said some version of the so-called "Trump put" — a play on options terminology that suggests the president would keep the stock market from falling too far — is back.

"The administration is finally signalling responsiveness to the very extreme market conditions we highlighted in the morning," he said in a note Wednesday.

"At the margin, this should reduce the probability that such an extreme policy mix returns. It is more likely that the administration accepts negotiated outcomes on trade (and other) policies, and it is more likely the administration becomes responsive to market pressure, if this continues."

Trump's shift in policy came on the same day his so-called reciprocal tariffs came into effect, with close to 90 countries being targeted.

China, however, did not get a reprieve from the president. He increased tariffs on the country to 125% after China said earlier in the day that it would increase duties on imports from the U.S. to 84%.

The European Union also retaliated Wednesday, with the bloc's lawmakers approving its first set of countermeasures in response to the steel and aluminum tariffs imposed by the U.S. in March.

Asia-Pacific shares were last widely higher in Thursday trading, with Japanese markets leading gains in the region.

Saravelos noted that U.S. President Donald Trump had mentioned the bond market during his press conference at the White House that day.

"The administration is finally signalling responsiveness to the very extreme market conditions we highlighted in the morning. At the margin, this should reduce the probability that such an extreme policy mix returns," Saravelos said.

Stocks on Wall Street surged on Wednesday after Trump announced a 90-day pause on country-specific tariffs, with the exception of new duties on China.

Despite the market response, Saravelos warned that "the damage has been done" by Trump's reciprocal tariffs policy.

"Even if the tariffs are permanently suspended, damage has been done to the economy via a permanent sense of unpredictability in policy," Saravelos explained. "The events of the last few weeks will resonate amongst global economic partners during the upcoming negotiations on trade and indeed for many years to come. The desire to build greater strategic independence from the US across all fronts will be here to stay."

Source: CNBC