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Business Standard
3 days ago
- Business
- Business Standard
Europe stock markets stage world-beating rally as trade war backfires
By Sagarika Jaisinghani and Julien Ponthus Europe's equities have emerged clear winners worldwide as the region's economic outlook brightens at a time when President Donald Trump's trade war hobbles US financial markets. Five months into the year, eight of the world's 10 best-performing stock markets are in Europe, according to data compiled by Bloomberg. That list features Germany's DAX Index with a rally of more than 30% in dollar terms, as well as peripheral markets such as Slovenia, Poland, Greece and Hungary. The pan-European Stoxx 600 Index is beating the S&P 500 by a record 18 percentage points in dollars, powered by Germany's historic fiscal spending plans and a stronger euro. Market participants say there's more to come as resilient corporate earnings and attractive valuations make the region a safer bet when concern over trade and fiscal debt grips the US economy. 'Europe is back on the map,' said Frederique Carrier, head of investment strategy for RBC Wealth Management in the British Isles and Asia. 'We are getting more questions about Europe now over the last two months than we did over the last 10 years.' The outperformance, if it lasts, will mark a turnaround from years of sluggishness for European markets. And the rally may just feed on itself: As stocks on the continent rise, they're likely to attract fresh assets from around the world, equity bulls say. UBS Group AG analysts said in a recent note that investors' shift away from US assets will channel €1.2 trillion ($1.4 trillion) into Europe's stock market over the next five years. An early impetus for this year's gains came from the proposal by Berlin — famous for its fiscal austerity — to spend hundreds of billions of euros on infrastructure and defense. Citigroup Inc. economists expect the reform to boost growth across the euro area from the second half of 2026. On the other side of the Atlantic, investors are on recession watch again amid concerns around inflation and America's fiscal deficit. Sentiment toward Treasuries took a hit in May after Moody's Ratings stripped the US of its top credit grade, with bond yields also climbing in response to Trump's tax-cut proposals. And in a blow to the president's trade agenda, a US court has issued a rare rebuke blocking many of the import taxes he has threatened and imposed on key partners. A proposed tax measure is also raising alarm on Wall Street as it would increase tax rates for individuals and companies from countries with 'discriminatory' tax policies, potentially driving away foreign investors. The S&P 500 rebounded in May, but remains a laggard for the year. The index has gained only about 0.5% in 2025 compared with a 12% jump in the MSCI All-Country World Index excluding the US. It also ranks 73rd among the 92 indexes tracked by Bloomberg. Beata Manthey, head of European and global equity strategy at Citigroup, said the euro area is in 'a relatively good place' as the European Central Bank has room to reduce interest rates further, while equity valuations aren't stretched. 'Of course if there's a US recession, no market would go unscathed, but the lack of exuberance in Europe makes it more resilient to a deeper selloff,' Manthey said. 'Investors had shunned the region for so long that inflows are still tiny compared with outflows of the past few years.' Peripherals Winning A slate of Europe's smaller markets is dominating the leader boards this year. Slovenia's blue-chip SBI TOP Index is the world's second-best performing gauge with a rally of 42% in dollar terms, behind Ghana's benchmark. Poland's WIG20 Index has gained 40%, while benchmarks in Greece and Hungary are up more than 34% each. Strategists at Societe Generale SA have recommended peripheral European markets this year, citing a wider risk premium as well as relative political stability. The team continues to predict an outperformance as they expect sovereign bond yields to be more protected than in some of the big spenders such as France and Germany. Defense stocks have been among the biggest winners this year, with seven of the 10 best-performing stocks in the Stoxx 600 related to the sector. All have surged at least 90%, with German contractors Renk Group AG, Rheinmetall AG and Hensoldt AG leading the pack. Banks and insurance stocks have also outperformed in 2025. 'What's not to love about European equities?' said Florian Ielpo, head of macro research at Lombard Odier Investment Managers. 'In the US you're punished for taking risk, but in Europe you're rewarded for it. Inflation looks contained, and there's finally some visibility. In the US, you're still wondering what will happen tomorrow, what tweets will you see.' Earnings Optimism Corporate earnings have been a bright spot, with first-quarter profits at MSCI Europe companies rising 5.3% compared with expectations of a 1.5% decline, according to data compiled by Bloomberg Intelligence. While many executives tempered their outlooks given lingering trade uncertainties, fewer analysts have cut earnings estimates in the past weeks, suggesting the worst of the downgrades may be over. To be sure, the global trade outlook remains a key risk. A federal appeals court has offered Trump a temporary reprieve from the ruling threatening to throw out the bulk of his tariff agenda. The president also said he would be increasing levies on steel and aluminum to 50% from 25%. Many European industries including miners, automakers and luxury goods are heavily exposed to international markets for revenue. Analysts this year have reduced Stoxx 600 earnings estimates for the coming 12 months by about 1.4%, according to data compiled by Bloomberg. Some market forecasters still bet European stocks will race past their US peers, with the team at JPMorgan Chase & Co. calling for the biggest outperformance on record. On average, a Bloomberg survey of 20 strategists found the Stoxx 600 is expected to gain another 1% from current levels. 'For the first time in a really long time I do believe there's a chance that European stocks can outperform the US market,' said Francois Rimeu, a strategist at La Francaise Asset Management. 'Now for this outperformance trend to hold, earnings will need to show some real growth next year.'
Yahoo
3 days ago
- Business
- Yahoo
Europe stocks stage world-beating rally as trade war backfires
(Bloomberg) — Europe's equities have emerged clear winners worldwide as the region's economic outlook brightens at a time when President Donald Trump's trade war hobbles US financial markets. Billionaire Steve Cohen Wants NY to Expand Taxpayer-Backed Ferry Now With Colorful Blocks, Tirana's Pyramid Represents a Changing Albania Where the Wild Children's Museums Are The Economic Benefits of Paying Workers to Move NYC Congestion Toll Brings In $216 Million in First Four Months Five months into the year, eight of the world's 10 best-performing stock markets are in Europe, according to data compiled by Bloomberg. That list features Germany's DAX Index with a rally of more than 30% in dollar terms, as well as peripheral markets such as Slovenia, Poland, Greece and Hungary. The pan-European Stoxx 600 Index is beating the S&P 500 by a record 18 percentage points in dollars, powered by Germany's historic fiscal spending plans and a stronger euro. Market participants say there's more to come as resilient corporate earnings and attractive valuations make the region a safer bet when concern over trade and fiscal debt grips the US economy. 'Europe is back on the map,' said Frederique Carrier, head of investment strategy for RBC Wealth Management in the British Isles and Asia. 'We are getting more questions about Europe now over the last two months than we did over the last 10 years.' The outperformance, if it lasts, will mark a turnaround from years of sluggishness for European markets. And the rally may just feed on itself: As stocks on the continent rise, they're likely to attract fresh assets from around the world, equity bulls say. UBS Group AG analysts said in a recent note that investors' shift away from US assets will channel €1.2 trillion ($1.4 trillion) into Europe's stock market over the next five years. An early impetus for this year's gains came from the proposal by Berlin — famous for its fiscal austerity — to spend hundreds of billions of euros on infrastructure and defense. Citigroup Inc. economists expect the reform to boost growth across the euro area from the second half of 2026. On the other side of the Atlantic, investors are on recession watch again amid concerns around inflation and America's fiscal deficit. Sentiment toward Treasuries took a hit in May after Moody's Ratings stripped the US of its top credit grade, with bond yields also climbing in response to Trump's tax-cut proposals. And in a blow to the president's trade agenda, a US court has issued a rare rebuke blocking many of the import taxes he has threatened and imposed on key partners. A proposed tax measure is also raising alarm on Wall Street as it would increase tax rates for individuals and companies from countries with 'discriminatory' tax policies, potentially driving away foreign investors. The S&P 500 rebounded in May, but remains a laggard for the year. The index has gained only about 0.5% in 2025 compared with a 12% jump in the MSCI All-Country World Index excluding the US. It also ranks 73rd among the 92 indexes tracked by Bloomberg. Beata Manthey, head of European and global equity strategy at Citigroup, said the euro area is in 'a relatively good place' as the European Central Bank has room to reduce interest rates further, while equity valuations aren't stretched. 'Of course if there's a US recession, no market would go unscathed, but the lack of exuberance in Europe makes it more resilient to a deeper selloff,' Manthey said. 'Investors had shunned the region for so long that inflows are still tiny compared with outflows of the past few years.' A slate of Europe's smaller markets is dominating the leader boards this year. Slovenia's blue-chip SBI TOP Index is the world's second-best performing gauge with a rally of 42% in dollar terms, behind Ghana's benchmark. Poland's WIG20 Index has gained 40%, while benchmarks in Greece and Hungary are up more than 34% each. Strategists at Societe Generale SA have recommended peripheral European markets this year, citing a wider risk premium as well as relative political stability. The team continues to predict an outperformance as they expect sovereign bond yields to be more protected than in some of the big spenders such as France and Germany. Defense stocks have been among the biggest winners this year, with seven of the 10 best-performing stocks in the Stoxx 600 related to the sector. All have surged at least 90%, with German contractors Renk Group AG, Rheinmetall AG and Hensoldt AG leading the pack. Banks and insurance stocks have also outperformed in 2025. 'What's not to love about European equities?' said Florian Ielpo, head of macro research at Lombard Odier Investment Managers. 'In the US you're punished for taking risk, but in Europe you're rewarded for it. Inflation looks contained, and there's finally some visibility. In the US, you're still wondering what will happen tomorrow, what tweets will you see.' Corporate earnings have been a bright spot, with first-quarter profits at MSCI Europe companies rising 5.3% compared with expectations of a 1.5% decline, according to data compiled by Bloomberg Intelligence. While many executives tempered their outlooks given lingering trade uncertainties, fewer analysts have cut earnings estimates in the past weeks, suggesting the worst of the downgrades may be over. To be sure, the global trade outlook remains a key risk. A federal appeals court has offered Trump a temporary reprieve from the ruling threatening to throw out the bulk of his tariff agenda. The president also said he would be increasing levies on steel and aluminum to 50% from 25%. Many European industries including miners, automakers and luxury goods are heavily exposed to international markets for revenue. Analysts this year have reduced Stoxx 600 earnings estimates for the coming 12 months by about 1.4%, according to data compiled by Bloomberg. Some market forecasters still bet European stocks will race past their US peers, with the team at JPMorgan Chase & Co. calling for the biggest outperformance on record. On average, a Bloomberg survey of 20 strategists found the Stoxx 600 is expected to gain another 1% from current levels. 'For the first time in a really long time I do believe there's a chance that European stocks can outperform the US market,' said Francois Rimeu, a strategist at La Francaise Asset Management. 'Now for this outperformance trend to hold, earnings will need to show some real growth next year.' —With assistance from Leonard Kehnscherper, Kwaku Gyasi and Michael Msika. 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Bloomberg
3 days ago
- Business
- Bloomberg
Europe's Stocks Dominate World Markets as US Trade War Backfires
Europe's equities have emerged clear winners worldwide as the region's economic outlook brightens at a time when President Donald Trump's trade war hobbles US financial markets. Five months into the year, eight of the world's 10 best-performing stock markets are in Europe, according to data compiled by Bloomberg. That list features Germany's DAX Index with a rally of more than 30% in dollar terms, as well as peripheral markets such as Slovenia, Poland, Greece and Hungary.
Business Times
09-05-2025
- Business
- Business Times
Germany's DAX Index hits record high after tariffs round trip
[FRANKFURT] Germany's DAX Index became the first major European gauge to surpass its March record high, recouping all declines sparked by US President Donald Trump's trade war. The stock index rose as much as 0.8 per cent to a level of 23,528.88, exceeding the intraday peak set on March 18. The pan-European Stoxx 600 Index gained 0.4 per cent by 9.10 am in London as US-China trade talks due this weekend buoyed sentiment. The DAX had previously slumped as much as 16 per cent as Trump's sweeping tariffs unleashed global market volatility. But the index has bounced as Washington took a softer tone on trade. Optimism around a German economic boom following the new government's fiscal reforms has also driven demand for local stocks. 'It needs to be said that the latest economic data, particularly in Germany, have been very favourable,' said Claudia Panseri, chief investment officer for France at UBS Wealth Management. 'This good news is coming in as the European Central Bank is giving signals it could lower rates a bit more than what investors expected.' The German index has become so popular that it's now relatively expensive, trading at the highest premium against its European peers since 2009. European stocks more widely have been in favour in 2025 as an improving economic outlook attracted investors looking for alternatives to US assets amid Trump's tariffs. The Stoxx 600 has so far outperformed the S&P 500 by a record 19 percentage points in dollar terms. 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 While the European benchmark's price-to-earnings ratio of 14 is now slightly higher than its 20-year average, it's still far cheaper than the S&P 500's ratio of nearly 21, according to data compiled by Bloomberg. About US$4.2 billion flowed into European stock funds in the week through May 7, according to a note from Bank of America citing EPFR Global data. BofA strategist Michael Hartnett has said he prefers international equities over the US this year. Among individual movers, Commerzbank rose 2.4 per cent after first-quarter profit unexpectedly rose as the German lender set aside less money than expected for souring loans amid the trade war. 'The banking sector has clearly been spearheading the European rally these past weeks along with industrials and real estate, these are solid drivers, notably for Germany,' Panseri at UBS Wealth Management said. BLOOMBERG
Yahoo
07-04-2025
- Business
- Yahoo
European Stocks Slide to December 2023 Lows as Defense Plunges
(Bloomberg) -- European stocks plunged, dropping to the lowest since December 2023 on the back of Donald Trump's tariff announcements, with Germany's DAX Index falling as much as 10%. Housing Agency Aims to Relocate Its DC Headquarters Boston Mayor Wu Embraces Trump Resistance as Campaign Heats Up This Skinny Mexico City Tower Is Just 14 Feet Wide on One Side The Irish Hot Press Is the Low-Tech Laundry Trick the World Needs What Would 'Transportation Abundance' Look Like? The Stoxx Europe 600 Index sank 6.3%, extending losses after its biggest weekly decline since March 2020, and the DAX tumbled 7.1% at 8:30 a.m. in London. The DAX fell to as low as 18,489.91, down more than 20% from its March record high, setting it up for a bear market if it closes at these levels. Sweden's OMX Stockholm 30 Index was down 7.1%, also heading for a bear market. Indexes in Italy, France, Switzerland and Germany slid into correction territory last week. Defense stocks, one of the best-performing industry groups this year, led the drop as investors built cash by selling winners. Rheinmetall AG lost 13% and Hensoldt AG tumbled 14%. All 20 sectors in the Stoxx 600 fell, with bank, energy and insurance shares among the biggest decliners. 'There's just a general sense of panic,' said Daniel Murray, Zurich-based chief executive officer of EFG Asset Management. 'Everything is getting killed, even good companies that will likely fare relatively well.' The Stoxx 600 tumbled Friday to cap the heaviest weekly losses since the start of the pandemic, taking the market into a correction on concerns that the escalating trade war will hurt economic growth and curb consumer demand. April has brought an abrupt turnaround after European equities rallied in the first quarter over optimism that fiscal reforms in Germany would boost economic growth. Light positioning, cheaper valuations and lower interest rates also helped the region outperform the S&P 500 by the most on record on a quarterly basis. But Trump's tariff announcements were more severe than expected, sending investors fleeing equities globally. The S&P 500 saw its biggest two-day plunge since March 2020, with the selloff slashing more than $5 trillion off the market's value. The Nasdaq 100 entered a bear market. Strategists are increasingly recommending investors avoid economically-sensitive shares such as energy, and instead favor loading up on defensive sectors such as telecoms and utilities. A team at Morgan Stanley last week said the uncertainty from tariffs will pressure earnings even if negotiations ultimately water down the initial announcements, due to delays to investment decisions, hiring, M&A and a consumer slowdown. Investors will be monitoring the European Union's response to the tariff announcements as the week kicks off. Finance ministers from Italy and Spain cautioned against too aggressive a response, while their counterpart in France said the bloc's response could include regulating the use of data by American big tech groups. With Shake Shack in First Class, Airline Food Is No Longer a Joke India's Destination Weddings Fuel a New Tourist Economy China Tells Kids to Study Manufacturing to Fill Factory Jobs Trump's IRS Cuts Are Tempting Taxpayers to Cheat How One MBA Grad Blew the Whistle on a $2 Billion Deal ©2025 Bloomberg L.P.
