European shares jump on hopes of easing tariff worries; ECB rate decision awaited

Shares of Volkswagen rose 3.1%, BMW gained 3.3% and Stellantis advanced 2.4%. Additionally, investors looked ahead to the European Central Bank's rate decision, scheduled for 1315 GMT, which is likely to result in a quarter-point cut. However, real estate and utilities firms capped gains on the benchmark as bond yields continued to rise ahead of the ECB decision. Lufthansa rose 7.5%.

European shares extended their gains on Thursday on hopes of easing trade tensions after U.S. President Donald Trump exempted automakers from his 25% tariffs on Canada and Mexico for one month.

The pan-European STOXX 600 was up 0.3% as of 0814 GMT. The benchmark index rallied in the prior session after German leaders agreed to overhaul borrowing rules to boost defence spending and revive growth. The automakers and components index jumped 1.2%. Shares of Volkswagen rose 3.1%, BMW gained 3.3% and Stellantis advanced 2.4%.

Additionally, investors looked ahead to the European Central Bank's rate decision, scheduled for 1315 GMT, which is likely to result in a quarter-point cut. The focus will be on policymakers' remarks about the central bank's future moves as the outlook seem to be obfuscated by the ongoing global trade war.

European banks led sectoral gains, rising more than 2% to a fresh record high. However, real estate and utilities firms capped gains on the benchmark as bond yields continued to rise ahead of the ECB decision.

Lufthansa rose 7.5%. The airline reported a decline in full-year operating profit in line with expectations. Merck KGaA rose 1.2% after the healthcare and technology group forecast currency-adjusted operating earnings growth of up to 8%.

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