European stocks rallied by the most since March 2022, a day after US President Donald Trump paused plans to implement higher reciprocal tariffs on dozens of trade partners, easing concerns for the moment about potential damages from a global trade war.

The Stoxx Europe 600 Index rose 3.7%, trimming earlier gains of as much as 7.3%. All sectors were in the green, with financial services and banks leading gains. France's CAC 40 advanced 3.8% and Germany's DAX added 4.5%. 

Trump announced a 90-day tariff reprieve Wednesday, providing relief for European stocks that had entered a correction last week. The European Union in return will delay the implementation of its counter tariffs in response to US duties on the bloc's steel and aluminum exports.

Elsewhere, underlying US inflation unexpectedly cooled in March, a positive for consumers ahead of widespread tariffs that risk contributing to price pressures. The consumer price index, excluding often volatile food and energy costs, increased 0.1% from February, the least in nine months.

There's some relief but the tariff on imports from China and the uncertainty around negotiations and "other side effects of this volatility could keep a risk premium in most assets," said Rajeev De Mello, chief investment officer at Gama Asset Management. Trump "will be reluctant to allow a worse episode but I would rather fade the risk-on moves from these levels as the market finds a new equilibrium."

Source : Bloomberg