The pan-European Stoxx 600 rose 0.59% to 613.17, with London’s FTSE 100 climbing 0.58% to 10,207.80.

France’s CAC 40 added 0.27% to 8,152.82, while Germany’s DAX lagged, edging down 0.1% to 24,908.23.

Dan Coatsworth, head of markets at AJ Bell, said “the FTSE 100 moved higher after gains in the US last night and across much of Asia,” though he cautioned that “it appears a period of relative stability over US trade policy is threatening to come to an end which could have consequences for global markets.”

Markets also tracked geopolitical developments after Donald Trump threatened South Korea with higher tariffs on autos, pharmaceuticals and lumber, warning levies could rise to 25% from 15% if Seoul’s parliament failed to ratify a trade deal with Washington.

Coatsworth noted that “the exception to the positivity in Asian markets was South Korea after the Trump administration announced it was raising tariffs on imports from the country to 25% after accusing Seoul of not living up to a deal agreed last year,” adding that “the potential threat of 100% tariffs on Canada if it strikes a trade deal with China also lingers in the air, after the possibility of import taxes on European goods was floated in the spat over Greenland.”

Despite the brittle backdrop, risk appetite held up, aided by firmer US equities overnight.

Interactive Investor head of markets Richard Hunter said “the latest level of uncertainty provided a fresh springboard for precious metals, with gold advancing once more to briefly touch $5,100 an ounce and with silver also in demand as investors sought to hedge their portfolio risk.”

He added that US indices advanced as attention turned to upcoming earnings from Tesla, Microsoft, Meta Platforms and Apple.

Patrick Munnelly, market strategy partner at TickMill, said broader market sentiment remained constructive, noting that “stocks extended their upward momentum for the fifth straight session,” while the MSCI All Country World Index “hovered near record levels, buoyed by a 0.7% surge in Asian shares, which reached an all-time high.”

He added that futures for US and European equity indices “signalled further gains ahead, following Monday’s strong performance on Wall Street,” even as volatility persisted across currencies and bond markets.

Sentiment was further supported by confirmation that the EU and India had finally signed a long-awaited free trade agreement, described by European Commission president Ursula von der Leyen as the “mother of all deals”.

After nearly two decades of negotiations, the agreement was expected to eliminate or reduce tariffs on 96.6% of traded goods by value, saving European companies €4bn in duties.

EU officials said the deal could double exports to India by 2032, building on existing annual trade in goods and services worth more than €180bn, with talks accelerated in recent months by Washington’s global tariff push.

Electric vehicles underpin EU car sales, UK inflation surprises to the upside

Economic data offered a mixed picture, with figures from the European Automobile Manufacturers’ Association showing EU new car registrations rose 1.8% in 2025 to 10.8 million vehicles, extending a gradual recovery but remaining below pre-pandemic levels.

Electrified vehicles drove growth, with battery-electric cars taking a 17.4% market share, up from 13.6% in 2024, and 1.88 million units sold.

Hybrids remained the most popular powertrain with a 34.5% share, while plug-in hybrids accounted for 9.4%.

Petrol and diesel combined fell to 35.5%, down from 45.2%, as battery-electric sales surged 43.2% in Germany and posted double-digit growth in the Netherlands, Belgium and France.

Competition intensified as BYD tripled European sales in 2025, while Tesla’s market share slipped to just over 2%, with Coatsworth noting that “Tesla saw yet another fall in sales in Europe in December, suggesting founder Elon Musk’s controversial political interventions are continuing to affect the brand.”

Across Europe including the UK and EFTA states, total car sales rose 2.4% to 13.3 million, though the association warned the recovery remained fragile amid regulatory and subsidy uncertainty.

In the UK, inflation data surprised to the upside.

The latest British Retail Consortium-NIQ shop price monitor showed inflation jumped to 1.5% in January from 0.7% in December, against expectations for no change.

Food inflation rose to 3.9%, with fresh food at 4.4%, while non-food prices returned to growth.

Munnelly noted that while shop price inflation remained below headline CPI, the food component “aligns with CPI food inflation, suggesting a potential upward revision in the next CPI release on 18 February,” adding that rising wholesale gas prices could slow the pace of disinflation in coming months.

BRC chief executive Helen Dickinson cited higher energy costs and National Insurance contributions, warning it was “a challenging time for households”, while NIQ’s Mike Watkins said cautious consumers could still find savings through promotions.

Puma surges on investment from Anta, Dr Martens in the red

In equities, shares in German sportswear group Puma surged after China’s Anta Sports Products agreed to buy a 29.06% stake for €1.5bn from the Pinault family, owners of luxury group Kering.

Siegfried Holding also jumped after agreeing to acquire drug substance businesses from Noramco Group and Extractas Bioscience, expanding US capacity.

European banks were strong, with the Stoxx Europe 600 Banks Index hitting its highest level since 2008.

On the downside, Swedish medical equipment maker Getinge slipped after reporting a slight fall in fourth-quarter order intake, with full-year revenue of SEK 34.97bn, narrowly below expectations compiled by LSEG.

In London, footwear group Dr Martens fell after quarterly revenue dropped 3.1% to ÂŁ251m, as direct-to-consumer sales slid 7% despite a 9.3% rise in wholesale.

Coatsworth said that while “protecting the integrity of the brand rather than flogging its footwear on the cheap is a sensible long-term approach,” investors “may be alarmed by the scale of the drop in European sales.”

Chief executive Ije Nwokorie said the company was “laser focused” on executing its strategy as it pivots towards more sustainable growth.

Reporting by Josh White for Sharecast.com.