European stocks close higher despite contraction in US economy

By Mucahithan Avcioglu

ISTANBUL (AA) - European stocks ended Wednesday with gains despite fears of a recession after the US economy contracted in the first quarter, contrary to expectations.

The pan-European Stoxx 600 rose 0.46%, or 2.39 points, to close midweek at 527.48.

Germany's DAX 40 index increased 0.32% to 22,496.98, while Britain’s FTSE 100 gained 0.37% to 8,494.85.

France's CAC 40 also climbed 0.5% to 7,593.87.

On the other hand, Italy's FTSE MIB declined 0.71% to close at 37,604.82.

The gross domestic product (GDP) of the US contracted by 0.3% in an annualized pace in the first quarter, despite the market estimates of a 0.2% rise.

"The decrease in the GDP in the first quarter primarily reflected an increase in imports, which are a subtraction in the calculation of GDP, and a decrease in government spending," the US Bureau of Economic Analysis said.

The movements were partly offset by increases in investment, consumer spending, and exports, it added.

The negative data fueled the fears of a global recession due to the uncertainty around the trade policy of the US President Donald Trump.

Meanwhile, the euro area's GDP expanded by a better-than-expected 0.4% in the first quarter.

The automotive sector particularly saw losses after Volkswagen and Mercedes posted negative financial results, Stoxx 600 automobiles & parts index fell 1.2%.

Volkswagen Group's shares fell by 2.43% after it reported a sharp 37% drop in operating profit in the first quarter of 2025, citing weakening demand in China, rising costs, and overcapacity at European factories, despite a modest uptick in sales revenue.

Mercedes-Benz also fell 2.73% after reporting a 40.7% drop in its first-quarter operating profit, citing slow luxury car sales in China and warning that new US tariffs could exacerbate its financial performance.