European, US shares helped by optimism around tariffs, bond yields rise

SINGAPORE/LONDON (Reuters) - U.S. futures and European shares rose on Tuesday, building on the previous day's gains on hopes of narrower-than-feared U.S. tariffs, while the dollar rolled off three-week highs against a basket of peers.

Europe's broad Stoxx 600 share index rose 1% in early trading with most national benchmarks and sectors in positive territory.

Investors' primary focus was the impending reciprocal tariffs promised by U.S. President Donald Trump and, while Trump said on Monday automobile tariffs were coming soon, he indicated that not all of his threatened levies would be imposed on April 2 and some countries may get breaks.

That led to an exuberant "risk-on" reaction in U.S. markets on Monday and the S&P 500 closed at its highest in more than two weeks, while a rally in tech stocks led Nasdaq up more than 2%. [.N]

The rally was set to continue on Tuesday, if less excitedly, and S&P 500 and Nasdaq share futures were up 0.2% in European trade.

But investors remain on edge before the April 2 deadline.

"Headline risks (are) the global investors' daily lot," said Benoit Anne, senior managing director, at MFS Investment Management's strategy and insights group.

"Only Covid caused more concern over policy uncertainty at the global level. We are currently facing numerous sources of risks, with the risk of trade war escalation standing out as the key item to watch."

Tariff news was also showing up in the oil market. Prices were up for a fifth day in a row, with Monday's and Tuesday's rises on the back of concerns about supply after Trump issued an executive order declaring that any country buying oil or gas from Venezuela would pay a 25% tariff on trade with the U.S.

Brent futures were up 52 cents to $73.52 a barrel and U.S. crude climbed 51 cents to $69.62. Both benchmarks gained more than 1% on Monday. [O/R]

Asian shares were an outlier however, and Hong Kong's Hang Seng index fell 2.35%, as tech stocks led a broad selloff. [.HK]

The Hang Seng is up 17% this year though, still the best-performing major stock market in the world, on AI bets after startup DeepSeek's sparkling debut.

BETTER DATA

Investors were also digesting activity and sentiment data this week. German business morale rose in March, Tuesday data showed, as companies expect a recovery after two years of contraction in Europe's largest economy.

The data comes after Germany passed a landmark bill to massively boost infrastructure and defence spending.

In the U.S. on Monday, S&P Global's flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, increased, suggesting the economy was regaining speed after hitting a soft patch halfway through the first quarter.

But so-called hard data, including retail sales and the employment report, have hinted at cracks in the foundation of the economy.

The broad risk-on mode led to a selloff in safe haven bonds, and Germany's 10-year Bund yield rose 5 basis points to 2.83%. [GVD/EUR]

The benchmark 10-year Treasury yield rose 8 bps on Monday, and rose higher on Tuesday, hitting a one month high. It was last up 3 bps at 4.358%. [US/]

In currency markets, the dollar had been supported by the higher U.S. yields, hitting a three week high against both a basket of peers and the rate-sensitive yen on Monday, but dipped as trading continued.

It was last at 150.0 yen down 0.44% on the day, and also softer on the euro which was at $1.082.

The Australian dollar was an outperformer climbing after the government launched fresh tax cuts on Tuesday and announced other cost-of-living relief in a major push to win back disgruntled voters. It was last up 0.51% at $0.6319.

Gold was up a touch at $3,022 per ounce. [GOL/]

(Reporting by Ankur Banerjee in Singapore and Alun John in London; Editing by Christian Schmollinger, Sonali Paul, Alex Richardson, Alexandra Hudson)