European markets pare losses to close higher after U.S. economy contracted

European stocks pared losses to close higher on Wednesday, as investors reacted to worse-than-expected economic data out of the United States.

The Stoxx 600 index closed up 0.46%, its seventh consecutive winning day.

The Stoxx automotive sector index fell 1.2% as earnings weakness overrode U.S. President Donald Trump signing an executive order that softened some of his automotive tariffs. The move maintains a 25% vehicle import rate but reduces the overall level as a result of additional duties on products such as steel and aluminum.

Healthcare stocks moved higher, with the regional Stoxx Healthcare index adding 1.3%. A number of companies in the industry addressed U.S. tariffs in their first-quarter earnings reports, with GSK, AstraZeneca and Smith+Nephew all telling investors they were well positioned to cope with any impact.

Trump’s tariffs have unsurprisingly emerged as a key theme in early corporate results, with many citing the difficulty of forecasting, while bank profits beat estimates. Those trends continued Wednesday, with Swiss lender UBS reporting better-than-expected net profit of $1.692 billion in the first quarter, while auto giant Stellantis suspended its full-year guidance due to uncertainties.

Elsewhere, preliminary data showed on Wednesday that the euro zone economy grew by a better-than-expected 0.4% in the first quarter of the year, following stagnation at the end of 2024.

Speaking to CNBC’s “Europe Early Edition” on Wednesday, Gediminas Šimkus, chair of the Bank of Lithuania and a member of the European Central Bank’s Governing Council, said he backed a quarter percentage point rate cut at the ECB’s next meeting in June and that it is “basically general knowledge” that U.S. tariffs will be disinflationary for the euro area in the short term.