European stocks higher after suffering worst day in 6 months

European stocks rose at the start of trading on Wednesday, after their worst day in more than six months.

The pan-European Stoxx 600 index rose 1.1%, the day after recording its worst daily performance since August 2024, as new US tariffs of 25% on imports from Mexico and Canada came into effect.

The European banking index led sector gains, rising nearly 4%, while Rheinmetall and Renk defense companies rose 1.3% and 5.5%, respectively.

Germany’s blue-chip index jumped 2.6% at the start of trading, approaching a record high, after the two parties negotiating to form the next German government agreed to create a 500 billion euro infrastructure fund and ease fiscal rules to boost defense spending and stimulate growth.

The US tariffs of 25% on Mexico and Canada went into effect on Tuesday after US President Donald Trump said the two major trading partners had “no room” to negotiate to avoid the tariffs. Investors were also concerned that the European Union could be the next target after Trump imposed 25% tariffs on cars and other imports from the EU last week.