LONDON — Stock markets rose on Wednesday after Japan and the United States hammered out a trade deal to slash Donald Trump's tariffs, including those on the crucial car sector.

 

Investors were also cheered by news that Washington had reached agreements with Indonesia and the Philippines, stoking optimism that other countries will also follow suit before Trump's August 1 deadline.

 

"News of a trade agreement between the US and Japan is fostering optimism among investors that further deals might be reached before punishing tariffs come into force," said AJ Bell investment director Russ Mould.

 

London's FTSE 100 was up 0.5 per cent, after hitting another record high at the open.

 

Paris piled on one per cent and Frankfurt also advanced, tracking gains in Asia.

 

Tokyo surged over three per cent after the US president announced a deal lowering tariffs on some Japanese goods to 15 per cent, down from the threatened 25 per cent.

 

The deal will also reduce tolls on autos -- a sector accounting for eight per cent of Japanese jobs -- to 15 per cent, compared, with 25 per cent for other countries.

 

In return, Japan pledged to invest $550 billion in the United States, Trump said on social media.

 

Shares in carmaker Toyota rocketed higher by more than 14 per cent, Mitsubishi 13 per cent and Nissan eight per cent.

 

European carmakers also rallied, with Porsche rising over seven per cent, while Volkswagen and BMW were up around six per cent in Frankfurt.

 

In Paris, Stellantis topped the gainers on the CAC 40, advancing close to seven per cent.

 

The deal is providing optimism that other countries can "seal good deals if they pledge investment into the US," said Kathleen Brooks, research director at trading group XTB.

 

Trump also hailed an agreement with Manila to lower levies on Philippine goods by one percentage point to 19 per cent, while tariffs on Indonesia were slashed from 32 per cent to 19 per cent.

 

Shares in Manila and Jakarta rallied.

 

The announcements boosted hopes of other deals before next Friday's deadline, though talks with the European Union and South Korea remain elusive.

 

The EU's top trade negotiator will speak to US Commerce Secretary Howard Lutnick later on Wednesday.

 

US Treasury Secretary Scott Bessent will meet his Chinese counterparts in Stockholm next week, as a separate mid-August deadline approaches for levies on Chinese goods to snap back to steeper levels.

 

Japan's 10-year government bond yield soared to the highest since 2008 after media speculation that Prime Minister Shigeru Ishiba would resign after a weekend election debacle, which he denied.

 

Elsewhere in Asia, Hong Kong hit its highest level since late 2021, while Shanghai was flat.

 

The advances came after a broadly positive day on Wall Street where the S&P 500 hit another peak but the Nasdaq snapped a six-day streak of records.

 

Eyes are also on the release of earnings from Google parent Alphabet and tech giants including Tesla and Intel.