Trump's erratic tariff policy shakes confidence in Europe's market bull run
Big asset managers including Amundi, Europe's largest, said they had held back or reduced bets on the euro or trimmed bullish European equity trades, as U.S. President Donald Trump prepares to announce reciprocal trade tariffs on April 2.
Many said that the so-called Europhoria trade that propelled German shares (.GDAXI), opens new tab to their best quarter since 2022 and the euro to a five-month high earlier in March had already factored in most foreseeable economic stimulus gains.
"If the Trump administration decides to push trade partners towards a trade war it will be bearish for European equities," Edmond de Rothschild Asset Management CIO Benjamin Melman said, adding he did not expect outsized gains for European stocks from here.
Global markets were roiled on Thursday following Trump's announcement of a 25% levy on car imports, with European equities (.STOXX), opens new tab down as much as 2% as billions of euros were wiped off German automakers' shares.
Pictet Asset Management's chief strategist, Luca Paolini, said more bad news on tariffs would probably hit European assets that had boomed on stimulus hopes harder than U.S. markets already depressed by the White House's erratic trade policy.
"I think it makes sense not to reverse out of Europe but to take some profits," he said. "The easy wins are over."
LOSE-LOSE
As the market view of tariff winners and losers switched around, the euro dropped close to $1.01 in February before rebounding as high as $1.095 on March 18.
Amundi's head of global FX Andreas Koenig said the group would refrain from building positions favouring the euro in case markets reverted to an expectation of tariffs supporting the dollar.
"What we all have in front of us still is April 2," Koenig said, in reference to what Trump has dubbed "Liberation Day".
Chris Jeffery, head of macro strategy at Britain's biggest asset manager Legal & General Investment Management, said the group had reduced a bet on the euro strengthening while Eren Osman, head of investment management at London bank Arbuthnot Latham, said he had scaled back a bet on European stocks but retained a slightly positive tilt.
Although Osman called an all-out trade war a "lose-lose" situation for global equities, he said stimulus spending might help European assets to do better than others in such a scenario.
"I don't think defence spending in Europe keeps it above water," he said. "But the fiscal boost is a separate narrative that provides a bit of support."
'SLOW AGONY'
Former European Central Bank chief Mario Draghi said in a widely read report last year that Europe faced "slow agony" and needed a more coordinated industrial policy, speedier decision making and an innovation boost on top of massive investment.
"For this rally to have a second leg, markets will need a new trigger. Hints that parts of the Draghi reports would be implemented would be key," said Rothschild's Melman, who is neutral on European stocks.
Europe's economic recovery is just starting to build, with business activity in mild growth territory and Germany predicting a two-year downturn will end.
Citi's euro area economic surprise index, which records whether data is surpassing market expectations, has been positive since early February.
But its separate gauge of whether actual euro zone data is trending above its one-year average remains below zero, showing there is no broad-based upswing.
Royal London Asset Management head of multi-asset Trevor Greetham said the UK group was considering a reduction in its U.S. equity holdings and favoured Europe.
"It's not that you can see a boom coming in Europe," he said, but he favoured the region "in relative terms".
Meanwhile, Russell Investments chief investment strategist Andrew Pease said the group's main global equity fund had a small positive bias to European stocks because the region's long-term prospects had improved, but was not adding more.
"The big question mark around all this is April 2," he said. "If this causes a global downturn then Europe can't escape it."
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
The Guardian
3 hours ago
- The Guardian
White House officials rush to defend Trump after shaky economic week
Donald Trump administration officials fanned out on Sunday's US political shows to defend the president's policies after a bruising week of poor economic, trade and employment numbers that culminated with the firing of labor statistics chief Erika McEntarfer. US trade representative Jamieson Greer said Trump has 'real concerns' about the jobs numbers that extend beyond Friday's report that showed the national economy added 73,000 jobs in July, far below expectations. Job growth numbers were revised down by 285,000 for the two previous months as well. On CBS News's Face the Nation, Greer defended Trump's decision to fire McEntarfer, a respected statistician, saying: 'You want to be able to have somewhat reliable numbers. There are always revisions, but sometimes you see these revisions go in really extreme ways.' He added: 'The president is the president. He can choose who works in the executive branch.' But William Beach, who served as Trump's commissioner of the Bureau of Labor Statistics (BLS) in his first presidency, warned that McEntarfer's dismissal would undermine confidence in the quality of US economic data. The BLS gave no reason for the revised data but noted that 'monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the recalculation of seasonal factors'. 'This is damaging,' Beach said on Sunday on CNN's State of the Union. 'I don't know that there's any grounds at all for this firing. 'And it really hurts the statistical system. It undermines credibility in BLS.' McEntarfer on Friday published a statement on social media reacting to her dismissal, calling it the 'honor my life' to have served as BLS commissioner. She said the BLS employs 'many dedicated civil servants tasked with measuring a vast and dynamic economy'. 'It is vital and important work, and I thank them for their service to this nation,' McEntarfer's statement on the Bluesky platform said. Uproar over McEntarfer's firing has come as a series of new tariff rates are due to come into effect this month. While the president has predicted a golden age for the US economy, many economists warn that higher import tariffs could ultimately weaken American economic activity. On CBS, Greer said that Trump's tariff rates are 'pretty much set' and unlikely to be re-negotiated before they come into effect. The first six months of Trump's second terms have been characterized by a seesawing of tariff rate announcements that earned the president the moniker on Wall Street of Taco – 'Trump always chickens out'. But last week he issued an executive order outlining tariff modifications for dozens of countries after he had twice delayed implementation. Yet Greer also said many of the tariff rates announced 'are set rates pursuant to deals'. 'Some of these deals are announced, some are not, others depend on the level of the trade deficit or surplus we may have with the country,' he said. On NBC's Meet the Press, the national economic council (NEC) director, Kevin Hassett, said modified US tariff rates were now 'more or less locked in, although there will have to be some dancing around the edges about exactly what we mean when we do this or that'. Asked if tariff rates could change again, he said, 'I would rule it out because these are the final deals.' On Fox News Sunday, Hassett said he also supported McEntarfer's dismissal. 'I think what we need is a fresh set of eyes at the BLS, somebody who can clean this thing up,' he remarked. But former treasury secretary Larry Summers told ABC's This Week that McEntarfer's firing was 'way beyond anything that Richard Nixon ever did', alluding to the late former president who resigned in 1974 over the Watergate scandal. Summers said Trump's claim that the poor job numbers were 'phony' and designed to make him look bad 'is a preposterous charge'. 'These numbers are put together by teams of literally hundreds of people following detailed procedures that are in manuals,' Summers said. 'There's no conceivable way that the head of the BLS could have manipulated this number. The numbers are in line with what we're seeing from all kinds of private sector sources.' Summers placed McEntarfer's firing, Trump's pressure on Jerome Powell, the Federal Reserve chair, to lower interest rates, and the strong-arm tactics that the administration has aimed at universities, law firms and media institutions in the same bucket. 'This is the stuff of democracies giving way to authoritarianism,' Summers said. 'Firing statisticians goes with threatening the heads of newspapers. 'It goes with launching assaults on universities. It goes with launching assaults on law firms that defend clients that the elected boss finds uncongenial. This is really scary stuff.'
BreakingNews.ie
3 hours ago
- BreakingNews.ie
Trump, Carney to speak in coming days, Canadian official says
US President Donald Trump and Canadian Prime Minister Mark Carney will likely talk "over the next number of days" after the U.S. imposed a 35 per cent tariff on goods not covered by the US-Mexico-Canada trade agreement, a Canadian official said on Sunday. Dominic LeBlanc, the federal cabinet minister in charge of U.S.-Canada trade, also told CBS News' "Face the Nation" that he was "encouraged" by recent discussions and believed a deal to bring down tariffs remained an option. Advertisement "We're encouraged by the conversations with Secretary Lutnick and Ambassador Greer, but we're not yet where we need to go to get the deal that's in the best interest of the two economies," LeBlanc said, referring to U.S. Commerce Secretary Howard Lutnick and U.S. Trade Representative Jamieson Greer. The trade minister said he expected Carney and Trump to speak "over the next number of days." "We think there is an option of striking a deal that will bring down some of these tariffs provide greater certainty to investment," LeBlanc said. Washington linked Friday's tariff announcement in part to what it said was Canada's failure to stop fentanyl smuggling. It was the latest blow in a months-long tariff war which Trump initiated shortly after returning to power this year. Carney says Canada accounts for just 1 per cent of U.S. fentanyl imports and has been working intensively to further reduce the volumes.
The Herald Scotland
4 hours ago
- The Herald Scotland
The estate that could solve Scotland's problem with trees
The forests offer much needed shade in Greece and also allow a variety of species an environment where they can thrive. Here in Scotland it may feel like there are trees everywhere, but the exact opposite is true as it is one of the least forested countries on the planet. Just drive a small distance outside of the main population centres and you will be met with miles upon miles of bleak nothingness, apart from areas that are farmland. It comes as tree planting is seen as a key tranche in achieving net zero and with a projected housebuilding timber shortage on the horizon. But Scotland's forestry industry is facing a funding black hole of £24 million and national planting targets will not be met now for at least two years. A massive budget cut has knocked the forestry industry's confidence, potentially stalling planting projects and leading to trees being destroyed. Confor, the Confederation of Forest Industries representative body, signalled a wave of concern along the supply chain from tree nurseries to sawmills and wood-panel manufacturers. Scotland has consistently failed to meet its tree planting targets, aiming to plant amounts rising from 15,000 hectares, or 30 million trees, to now 18,000 ha each year, but the industry has faced harsh funding cuts. Rural Scots are right - maybe it is time to halt onshore windfarms Trump is right for once, it is time to drill, baby drill in the North Sea It is high time that irresponsible campervan users are taxed off the NC500 We're going to need a smaller boat: The large ferry dilemma for CalMac A 41% budget cut in 2023 was only partially restored last year by around 18% to £45m. Edinburgh-based Confor said a further £24m is needed for the target mathematics to work, but that low confidence is likely to impact new projects being brought forward. However, a 10,000-acre estate in the Highlands is a great example of what can be achieved with the proper ambition. Dundreggan rewilding centre in Glenmoriston has just been awarded special European status recognising its genetic diversity of tree species. Parts of the juniper and silver birch woodland at Trees for Life's site have been classed as Gene Conservation Units. A spokesperson for the conservation charity said the 'unusually wet location' of juniper and the 'extreme westerly location' of silver birch have helped make the tree populations unique. The classification has been awarded by the European Forest Genetic Resources Network (EUFORGEN) which is managed in the UK by nature agency Forest Research. The estate uses a 'dynamic conservation' technique to protect the trees' genetic diversity. The land is encouraged to regenerate naturally within its specific environment and weather conditions. Juniper is a slow-growing evergreen shrub or small tree, with small blue-green needles and berries that ripen to a dark, blue-purple colour. The species support biodiversity by providing shelter and food for wildlife. Juniper berries are also used to produce gin. Silver birch is a fast-growing species which spreads over open ground. The tree's roots draw up nutrients, and its leaves add richness to soil. The Gene Conservation Unit status means Dundreggan's juniper and silver birch will be monitored to ensure their survival and natural regeneration. The estate covers 10,000 acres and has so many rare species living within it that environmentalists have described it as a 'lost world'. Conservation charity Trees for Life bought the site for £1.65million which remains one of the UK's largest ever areas of land bought for forest regeneration. The former hunting estate was already home to ancient forest fragments, including outstanding areas of juniper and dwarf birch. The charity has since planted half a million trees at the site, ensuring natural regeneration of woodlands and encouraging the return of rare wildlife, plants and insects. A rare non-biting midge and several other species have since been discovered after surveys of the estate. In total, more than 3,300 species have now been recorded at the charity's forest restoration site with at least 68 of these are priority species for conservation. These include unusual species such as the strawberry spider with several never having been recorded in the UK before, or were feared extinct in Scotland. While it is relatively small in the grand scheme of things, it should be an inspiration for other land owners when it comes to rewilding land and planting forests. Scotland needs more native trees and it is baffling why such a large proportion of the country is entirely treeless. The timber industry is worth around £1billion a year to the economy but even commercial plantations barely scratch the surface of what is required. It is all well and good for ministers to set tree planting targets, but without proper funding these will never be met. Ministers should see what has been done elsewhere and replicate it at pace.
