Euro STOXX 600 jumped 1%, Japan’s Nikkei climbed 3.7%

European shares climbed on Wednesday, buoyed by hopes of a trade agreement between the European Union and United States after Japan struck a deal that lowers tariffs on its autos, sending Japanese stocks to a one-year high.

President Donald Trump on Tuesday said a trade deal with Tokyo will include Japan paying a lower-than-threatened 15% tariff on shipments to the U.S. It followed an agreement with the Philippines that will see the U.S. collect a 19% tariff rate on imports from there.

Trump also said EU representatives were coming for trade negotiations on Wednesday. That stirred hopes for a deal with Europe, even as the EU was reportedly refining countermeasures in case of a deadlock before the August 1 deadline.

Euro STOXX 600 jumped 1%, with auto shares surging 3.6%. UK shares hit a record high, climbing 0.5%.

The trade deal news has “raised hopes that the U.S. might be about to reach deals with other countries that avoid the higher tariffs on August 1,” Deutsche Bank analysts wrote in a note.

On Wall Street, S&P 500 futures were up 0.2%, while Nasdaq futures added 0.1%.

Japan’s Nikkei climbed 3.7% as automaker shares surged on news the deal would cut the U.S. auto tariff to 15%, from a proposed 25%. Mazda Motor rose 18%, while Toyota Motor jumped 14%.

South Korean automakers also rose as the Japan deal fuelled optimism over potential progress in tariff negotiations between South Korea and the United States.

The dollar remained weak, having lost ground overnight.

It traded flat at 146.71 yen after sliding 0.5% on Tuesday. The dollar index , which tracks the currency against major peers, was little changed at 97.48.

Analysts noted the trade deal reduced a major risk to the fragile Japanese economy, providing more scope for the Bank of Japan to raise interest rates to fight inflation.

That hit the bond market, with yields for 10-year JGBs rising 8.5 basis points to 1.585%.

Japan’s Prime Minister Shigeru Ishiba denied reports he planned to step down following a bruising upper house election defeat. Ishiba said media reports that he had already decided to resign were “completely unfounded.”