European markets and policymakers faced a mix of shifting investor sentiment, political developments, and trade and energy policy decisions on Monday, as easing geopolitical tensions lifted equities while key structural challenges remained in focus across the region.
European markets rebound on easing tensions
European shares rebounded on Monday, snapping a three-day losing streak after US President Donald Trump said he would postpone strikes on Iranian energy infrastructure following “productive” conversations with Tehran.
The pan-European STOXX 600 rose nearly 0.6% to 576.78, recovering from an earlier drop of as much as 2.5%.
Regional indices including Germany’s DAX and Spain’s IBEX 35 rose over 1%, while miners, financials, and travel stocks gained between 2.5% and 2.6%.
A sharp 9% decline in Brent crude weighed on energy stocks, which fell 1.7%, while airlines such as Air France and Lufthansa climbed strongly.
Despite the rebound, the STOXX 600 remains close to correction territory, down about 9% from its February peak.
Investors also trimmed expectations of interest rate hikes by the European Central Bank, though concerns about inflation and growth persist.
Italy referendum setback: voters reject judicial overhaul
In Italy, Prime Minister Giorgia Meloni conceded defeat after voters rejected a proposed judicial reform in a national referendum.
“The Italians have decided. And we respect this decision,” Meloni said. “This does not change our commitment to continue, with seriousness and determination, to work for the good of the nation and to honour the mandate entrusted to us.”
Preliminary results showed around 55% voted against the reform, with turnout nearing 59%.
The proposal aimed to restructure Italy’s judiciary by separating career paths for judges and prosecutors and creating new oversight bodies.
Opponents argued it could undermine judicial independence.
Political reactions were mixed, with opposition leaders criticizing the proposal, while government allies acknowledged the setback.
The result represents a significant political test for Meloni’s administration, though she ruled out resignation.
EU moves ahead with Mercosur trade deal implementation
The European Commission confirmed it will move ahead with provisional implementation of the Mercosur trade agreement starting May 1, despite ongoing legal challenges.
The deal covers Argentina, Brazil, Paraguay, and Uruguay, creating a free-trade area of more than 700 million people.
“The priority now is turning this EU-Mercosur agreement into concrete outcomes, giving EU exporters the platform they need to seize new opportunities for trade, growth and jobs,” said Maroš Šefčovič. “Provisional application will allow us to begin delivering on that promise.”
The move follows procedural steps taken after Paraguay’s ratification, allowing the agreement to take effect even as the European Parliament seeks a legal review.
While supporters see the deal as key to boosting trade and supply chain resilience, opposition remains strong among European farmers concerned about competition from imports.
US urges EU to ease methane rules amid energy concerns
The United States has intensified pressure on the European Union to relax methane emission regulations on energy imports, warning of potential supply constraints.
“If Europe wants to have affordable energy, it’s going to need to reduce the regulatory requirements and restrictions that it has in place,” said Andrew Puzder, the US ambassador to the EU.
“It could be a very severe energy crisis if Europe doesn’t act,” he added.
The comments come amid disruptions linked to the Iran conflict, including damage to Qatar’s Ras Laffan LNG facility, a key global supply hub.
While the EU sources much of its LNG from the US, stricter methane rules could complicate imports.
The bloc plans to enforce monitoring requirements from next year and introduce penalties by 2030 for emissions exceeding thresholds.
“There are a lot of markets for these fossil fuel products, particularly LNG,” Puzder said. “I’d like to see us dealing with Europe on this issue in a way that’s economically beneficial to Europe and the United States.”
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