European Stocks Rally, Markets Test “Trump Put” Optimism
European stocks rose for a third straight day on Wednesday (March 25th) as investors assessed the Trump administration's efforts to end the war in the Middle East, while Iran set five conditions for a ceasefire. The Stoxx Europe 600 Index closed up 1.4% after rising as much as 1.8% intraday.
The gains were led by mining and financial services stocks, while telecommunications lagged. Inwit SpA weakened after its major customer, Swisscom AG, reportedly sought to terminate its service agreement in 2028. Despite weakness in some specific names, all sectors ultimately closed in the green.
Market focus remains on geopolitical dynamics that could potentially impact energy prices and inflation. The US reportedly drafted a 15-point plan to help push for an end to the conflict, but Iran has rejected the proposal and continued attacks on Israel and Gulf Arab states, dealing a blow to Washington's de-escalation efforts. This combination of diplomatic signals and escalation on the ground has kept sentiment fragile, but not enough to shift the risk-on bias in European equities.
Investors are also awaiting central bank policy direction in responding to the impact of the war on energy costs. ECB President Christine Lagarde stated that the central bank will act decisively and swiftly if the current surge in energy costs risks triggering broader inflation, although the ECB is still assessing the magnitude of the conflict's shock. The main transmission: rising energy prices have the potential to push up headline inflation and depress purchasing power, thus opening the door to a tighter monetary policy response if second-round effects begin to form.
On the positioning side, Barclays assesses that investor positions in the stock market are "not yet close to capitulation," with confidence in the "Trump put" still holding. This narrative suggests that some market participants are still relying on the assumption of policy incentives or implicit support to stem the sharp decline in risk assets.
In individual stocks, Grifols briefly surged as much as 9.5% before paring gains to around 1.4% after the Spanish blood plasma company prepared an IPO to sell a minority stake in its US biopharma business. Meanwhile, RS Group fell 4% after the electronics and industrial products distributor warned that like-for-like sales were expected to decline through the end of March, below market expectations.
Going forward, the market will monitor developments in negotiations and escalations in the Middle East, energy price movements, and further signals from the ECB regarding inflation risks and policy responses. Furthermore, the direction of sector rotation—particularly in financials, mining, and telecommunications—will be an indicator of whether this risk appetite-driven rally will persist.
Source: Newsmaker.id
