Europe stocks open higher, led by Germany

European stock markets opened higher Wednesday, with Germany’s DAX index jumping 2.8% after the parties expected to form the next government agreed a deal that could lead to increased spending on infrastructure and defense.

France’s CAC 40 and the U.K.’s FTSE 100 were 1.8% and 0.5% higher, respectively, with the pan-European Stoxx 600 index up by 1.2%.

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Stoxx 600 index.

The Cboe Volatility Index, known as the VIX, has jumped above the 20 threshold during each of the last seven sessions as Trump’s trade war ramped up.

It’s the longest steak the index has traded above the 20 level on an intraday basis since mid-October. The VIX looks at prices of options on the S&P 500 to track the level of fear on Wall Street.

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The Cboe Volatility Index

The “flight to safety across financial markets” in reaction to the U.S. tariffs and weak economic data could turn out to be an overreaction if President Trump changes his mind, “but the downside risks to our upbeat forecasts for U.S. financial markets have increased,” according to Capital Economics in London. “[T]he ‘Trump trade’ and the wider optimism around the U.S. economy and financial markets has faded in short order.”

The latest round of tariffs take the effective U.S. tariff rate up to about 12%, the highest since the late 1940s, and the next scheduled round mean the effective rate “may well rise much further,” wrote Jonas Goltermann, deputy chief markets economist.

Downbeat economic numbers, “a broader reassessment of the near-term economic outlook in the U.S.,” policy uncertainty together with weaker confidence among businesses, consumers and investors all combine to create “headwinds for equity markets,” Goltermann said.

— Scott Schnipper

These are the stocks moving the most in after-hours trading:

• AeroVironment — The manufacturer of unmanned aircraft tanked 16%. AeroVironment issued weak guidance for its full-year results, calling for adjusted earnings of $2.92 to $3.13 per share on revenue of $780 million to $795 million.
• CrowdStrike — The cybersecurity stock tumbled 9%. The company sees its full-year revenue coming in between $4.74 billion and $4.81 billion, which encompasses the $4.77 billion consensus prediction, per FactSet.
• Ross Stores — The off-price retailer inched higher by less than 1%. Fourth-quarter earnings surpassed estimates, coming in at $1.79 per share, versus analysts’ call for $1.66 per share, per LSEG.

Read the full list of stocks moving here.

— Lisa Kailai Han