Europe: Shares gain on defence boost, tariff delay aids sentiment
EUROPEAN shares closed higher on Tuesday with defence stocks boosting the market after US President Donald Trump threatened additional sanctions on Russia, while optimism lingered from the delay of US tariffs on the European Union.
The Stoxx 600 index closed 0.33 per cent higher at 552.32, building on Monday's 1 per cent rise after Trump gave the EU a reprieve on his threatened 50 per cent tariffs.
EU policymakers have asked the bloc's leading companies and CEOs for US investment plans to prepare for trade talks with Washington, according to two sources.
The bloc set up trade meetings with the United States, a step Trump said was positive.
The latest flip-flop on EU tariffs highlights the unpredictability of Trump's trade policies, that have been shaking investor confidence and raising concerns over the fiscal health of the US economy.
The uncertainty has been pushing investors away from US assets to find other safe havens internationally.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
Sign Up
Sign Up
Europe's defence index jumped 1.7 per cent to a record high, after Trump said he would recommend additional sanctions on Moscow, amid escalating tensions between Russia and Ukraine.
'There is recognition of the fact that Trump is less close to Putin than he had been and that there is more likely to be a prolonged conflict in Ukraine rather than the quick end' said Nick Saunders, CEO of Webull UK.
'Defence is definitely a sector that is in fashion at the moment.'
Technology shares rose 1.1 per cent, while industrials added 0.9 per cent.
'People are actually looking for value at the moment and trying to pick the most profitable stocks rather than assuming that the rising tide is going to float all boats,' said Saunders.
In Germany, the DAX 40 ended 0.8 per cent higher, closing at an all-time high, after a survey indicated consumer sentiment is set to improve slightly heading into June.
However, the German Chamber of Commerce and Industry (DIHK) forecast a contraction in the economy this year.
Euro zone government bond yields dipped on the day.
Britain's FTSE 100 share index ended 0.7 per cent higher as investors returned following a holiday on Monday.
French benchmark index CAC 40 was flat after preliminary data showed inflation fell to its lowest level since December 2020 in May, with the government hinting at proposals to get public finances under control in early July.
FLSmidth rose 3.4 per cent after Goldman Sachs raised the mining and cement technology supplier's rating to 'buy' from 'neutral' on expectations of higher margins. REUTERS
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Straits Times
30 minutes ago
- Straits Times
Singapore and France expand defence cooperation with three new agreements
Singapore and France expand defence cooperation with three new agreements SINGAPORE – Singapore and France have signed three defence agreements to deepen cooperation in areas such as artificial intelligence (AI) and advanced defence technologies. They were sealed during French President Emmanuel Macron's s tate v isit to Singapore on May 30, in conjunction with the two countries upgrading their relationship to a Comprehensive Strategic Partnership (CSP). The three agreements are : a Declaration of Intent (DOI) on Enhanced Defence Cooperation, a Letter of Intent (LOI) on Defence Artificial Intelligence Cooperation, and an amendment to the existing Administrative Arrangement on Defence Technology Cooperation (AADTC). The DOI sets out the two countries' commitment to deepen and expand their defence relationship across multiple domains of mutual interest and shared expertise, including in digital defence. It also forms the foundation for both sides to explore new areas of collaboration, such as in critical and emerging technologies, while recognising the support both countries have provided for each other's military activities, said Mindef in a statement. The LOI aims to expand the work of a joint laboratory that Singapore and France set up in April 2023. The laboratory, which focuses on the use of AI in military applications, exemplifies both sides' shared goal of involving operational users and industry partners to co-develop solutions to meet battlefield needs and emerging security threats. Mindef said use cases that both sides have identified include data analysis, countering misinformation and disinformation, autonomous systems, and checking that AI systems work as intended and are safe to use. The final agreement updates a longstanding framework that both sides use to work on the research and development of emerging and advanced areas of defence technology. The original AADTC was signed in November 2003 and last updated in April 2016. The latest agreement adds new areas for cooperation, including in quantum, microelectronics and supply chain resilience, said Mindef. The signings, by Minister for Defence Chan Chun Sing and French Minister of the Armed Forces Sébastien Lecornu, were witnessed by Prime Minister Lawrence Wong and President Macron. The defence agreements are part of a broader effort by the two countries to strengthen mutual cooperation as part of their upgraded partnership . The CSP upgrade, announced during President Macron's visit, aims to build cooperation in other areas as well, such as education , digital policy and green energy. The CSP is Singapore's first with a European country, following similar arrangements with Australia and Vietnam. At a press conference during the visit, PM Wong said defence has always been a 'pillar' of the relationship between the two countries, and that it will be buttressed going forward. 'Under the new partnership, we will enhance cooperation in other areas, including deployment of defence technology and critical and emerging technologies,' he said. Join ST's WhatsApp Channel and get the latest news and must-reads.
Business Times
42 minutes ago
- Business Times
US consumer spending growth slows while inflation remains soft
[WASHINGTON] US consumers hit the brakes in April after the strongest month of spending since early 2023 while inflation remained tame, consistent with a slowing economy. Inflation-adjusted personal spending rose 0.1 per cent after rising 0.7 per cent a month earlier, Bureau of Economic Analysis data showed Friday. The personal consumption expenditures price index, excluding food and energy, increased 0.1 per cent from a month earlier. Compared with a year earlier, the so-called core inflation gauge rose 2.5 per cent from April 2024 – the smallest annual advance in more than four years. The figures illustrate an undercurrent of anxiety among many American consumers about the economy after the weakest quarter for spending in nearly two years. While higher duties on imports have yet to show up more broadly in higher goods prices, sentiment has slumped and the outlook for personal finances stands at a record low. The modest rise in spending reflected an increase in services that more than offset a decline in durable goods outlays. At the same time, the Trump administration has walked back or paused some tariffs as negotiators work toward trade deals with key partners including China and the European Union. On Wednesday, a US court issued a ruling that blocks many of the import taxes. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Separate data out Friday showed a massive narrowing of the US merchandise-trade deficit in April on the largest-ever decrease in imports. The constant state of flux in trade policy has nonetheless fuelled uncertainty, with consumers' spending attitudes hanging in the balance. Meanwhile, Federal Reserve policymakers will likely keep interest rates unchanged for the foreseeable future until they get more clarity on the impact of tariffs not only on prices but also on other pillars of the economy like the labour market and consumer spending. Economists are paying close attention to the degree to which companies are passing through higher import duties to consumers. A measure of goods inflation that excludes food and energy climbed 0.3 per cent. While many companies have so far been absorbing or offsetting much of the hit from tariffs, retailers including Walmart and Macy's Inc have indicated Americans will start seeing price hikes soon. BLOOMBERG
Business Times
42 minutes ago
- Business Times
There's a ticking time bomb in Trump's ‘big, beautiful Bill'
THIRTY years ago, when I was a rookie reporter, a veteran writer offered me sage advice: whenever presented with a government or corporate document that is more than 100 pages long, hunt for hidden bombs. Donald Trump's thousand-page (plus) 'big, beautiful Bill' is a case in point. Since the House of Representatives passed it last week, this fiscal act has been (rightly) lambasted for many reasons: it favours the rich over the poor; cruelly cuts social safety nets; and recklessly expands the debt. Even Elon Musk is upset. But what investors should also fret about, if they care about the state of Treasuries or are a non-American entity holding US assets, is a clause buried in the bowels of this behemoth called section 899. This would enable the US Treasury to impose penalties on 'applicable persons' from 'discriminatory foreign countries' by increasing US federal income tax and withholding rates by up to 20 percentage points on their US investments, on a variable scale. It might thus be viewed as a novel 'revenge tax' (as some lawyers call it) that Trump could use to bully friends and foes alike in trade negotiations. So, at best, all this undermines prior efforts to build a collaborative global tax system via groups such as the Organisation for Economic Co-operation and Development, with its undertaxed profits rules. At worst, it makes Trump look like a feudal European king intent on using tax as a capricious tool to extract foreign tribute. Either way, it undermines the idea that America is a place of consistent investment laws – and has shocked lawyers in countries such as Canada. 'Section 899 is toxic (and) a potential game-changer for foreign investment,' Larson Gross, a tax advisory group, told clients this week. Or as Neil Bass, a Canadian lawyer wrote in his own missive: 'The US just declared a tax war and it's targeting allies.' George Saravelos, an analyst at Deutsche Bank, writes in a client note: 'Section 899 challenges the open nature of US capital markets by explicitly using taxation on foreign holdings of US assets as leverage to further US economic goals.' BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up So will this actually become law? The only honest answer (as with so much of Trump policy-making) is 'no one knows'. Trump's bark, after all, is often worse than his bite, and the courts sometimes rein him in, as seen with tariffs this week. Known unknowns In any case, there are a host of known unknowns around section 899. The Senate might insist that this clause is watered down or removed. Or if the surcharge stays intact, there may be provisions to let affected non-American investors and companies offset this against domestic tax bills. No one exactly knows how a 'discriminatory foreign country' will be defined (although the Treasury is supposed to regularly report on that). Nor is it entirely clear what investors and companies might be hit. At first glance, the Bill only affects non-US investors and companies already subject to US tax. But, as I recently noted, the White House recently warned in an executive order that it might overturn a crucial 1984 ruling that exempted Chinese investors, among others, from a prior 30 per cent withholding tax on assets such as US Treasuries. If so, those flows might be hit by section 899 too, as analysts such as Michael McNair suggest. Another reason for uncertainty is splits among Trump's own advisers. I am told that some love the idea of imposing revenge taxes on foreigners, since it will play well with the Maga base – and a think-tank allied with vice-president JD Vance reckons that such taxes could raise US$2 trillion revenue in the next decade. And figures such as Howard Lutnick, commerce secretary, are keen to find new weapons to wield in their trade negotiations with the EU and Canada. As the law firm Davis Polk points out, the fact that those two regions – along with the UK – impose digital services taxes could make them easy targets for section 899 measures. But Scott Bessent, Treasury secretary, is likely to be wary of invoking section 899 since he does not want to scare global investors away from Treasuries. After all, he needs to sell oodles of US government bonds to fund the ever-expanding debt – and there are already hints of some capital flight. Undermining global trust Either way, the key point is that the mere presence of section 899 in this Bill – whatever ultimately happens – is likely to further undermine global trust, given that it shows that the Trump team is at least entertaining the idea of turning trade wars into capital wars, in the future. No wonder investment groups ranging from Canadian pension funds to mighty Asian institutions tell me that they are stealthily diversifying away from US assets. Or that Federal Reserve officials recently fretted about the likely damage to America's economy if its 'safe haven' investment status is undermined. As legislative bombs go, this is self-defeating. The Senate should kick it away. FINANCIAL TIMES
