European shares started the week positively on Monday, recovering losses from the previous session after U.S. President Donald Trump postponed his plan to impose a 50% tariff on European goods.

The STOXX 600 index rose by 1%, rebounding from Friday’s 0.9% drop caused by Trump’s surprise tariff threat. He pushed the tariff deadline back to July 9 from June 1, following a request from European Commission President Ursula von der Leyen for more time to negotiate a deal.

The auto sector, sensitive to tariffs, led gains with a 1.8% rise, despite a 3.3% fall in Porsche shares. Defence stocks also helped, with Rheinmetall and Leonardo up more than 3% each. The aerospace and defence index grew 1.7%, boosting industrial stocks by 1.5%.

German shares climbed 1.7%, nearing record highs thanks to strong performance in defence and auto companies. Luxury brands like Kering, LVMH, and Richemont also rose about 1%, lifting the luxury index.

UBS’s Mark Haefele cautioned that while the delay is good news, investors may be too optimistic about trade talks.

The euro strengthened, and government bond yields remained steady as Trump stepped back from his tariff threats. Concerns about a U.S. economic slowdown and recent credit rating downgrade by Moody’s have made investors wary of U.S. assets.

Swissquote analyst Ipek Ozkardeskaya said trade and geopolitical tensions have shifted investor sentiment away from the U.S. as a safe haven.

Trading volumes were low due to holidays in the U.S. and UK, but U.S. futures were up over 1%.

Notably, Thyssenkrupp shares surged 8.8% after reports the company will hold a shareholder vote in August on spinning off its warship division. Zealand Pharma led the STOXX 600 with a 10% gain.

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