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Business Standard
4 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
07-04-2025
- Business
- Yahoo
Wall Street abandons uber-bullish S&P 500 calls on tariffs hit
(Bloomberg) — Wall Street forecasters are racing to temper their views on US equities as President Donald Trump's sweeping tariffs threaten to upend the global economy. 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? Oppenheimer & Co.'s John Stoltzfus — the biggest bull among strategists until March — became the latest to slash his year-end target on the S&P 500 Index, to 5,950 points from 7,100. Morgan Stanley's (MS) Michael Wilson warned the benchmark could sink another 7% to 8% if the Trump administration stays firm on levies. Strategists at Evercore ISI, Goldman Sachs Group Inc. (GS) and Societe Generale SA have also reduced targets in recent days. In a note to clients Monday, Stoltzfus said uncertainty was 'at levels investors find hard to embrace.' This is being combined with 'a negative pitch book that seemingly projects negative outcomes to infinity.' The strategist's new estimate still forecasts a 17% rebound in the S&P 500, although he said company executives are sounding more cautious. 'While our expectations are for cooler heads to prevail in the trade negotiation process, the market's reaction suggests to us a need to right size expectations in the near term.' S&P 500 futures (^GSPC) sank as much as 5.4% on Monday, putting the benchmark on course for a bear market, after wiping out over $5 trillion in value in just two days last week. The rout was sparked by Trump imposing the steepest US tariffs in a century, saying he'll apply a 10% levy on all exports to the US, with higher duties on some 60 nations — including China and the European Union — to counter trade imbalances. China has already pledged retaliatory levies, escalating a trade war and raising fears of a global recession. Europe's Stoxx 600 Index tumbled as much as 6.5%, while in Asia, an MSCI gauge plunged over 8% in its worst day since 2008. The CBOE Volatility Index — known as Wall Street's fear gauge — soared to over 60 points. 'The market does not yet appear to be pricing a recession, and the 2022 experience shows that the market can continue to decline in the face of deteriorating fundamentals even alongside light positioning,' Goldman Sachs strategist David Kostin said. The bank's economists now see a 45% chance of recession in 12 months. Investors are looking to the Federal Reserve for signs of faster interest-rate cuts. Trump on Friday also called on the central bank to slash rates, but Chair Jerome Powell said policymakers are likely to remain on hold as they monitor the impact of levies on inflation. 'Investors should be prepared for another 7%-8% potential downside from Friday's close if there is no line of sight to a less severe trade environment and the Fed remains firmly on hold,' Morgan Stanley's Wilson wrote in a note. The strategist said a drop of that magnitude would bring the S&P 500 close to its 200-week moving average at 4,700. Evercore ISI strategist Julian Emanuel cut his year-end target to 5,600 over the weekend, roughly 10% above Friday's closing level of 5,074. His previous target of 6,800 was among the highest on Wall Street, according to data compiled by Bloomberg. Emanuel also lowered his estimate for the S&P 500's per-share earnings in 2025 and 2026 to $255 and $272, respectively. 'Remaking 80 years of economic, geopolitical and domestic governmental order, post WWII bedrocks — in 80 days – is messy business,' Emanuel wrote in a note. 'Doing it with the 'sledgehammer' of a larger tariff than 1930's Smoot-Hawley, was bound to cause turmoil.' (Adds details throughout) 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 How One MBA Grad Blew the Whistle on a $2 Billion Deal Trump's IRS Cuts Are Tempting Taxpayers to Cheat ©2025 Bloomberg L.P. By subscribing, you are agreeing to Yahoo's Terms and Privacy Policy Sign in to access your portfolio
Bloomberg
02-04-2025
- Business
- Bloomberg
European Stocks Fall as Trump Tariff Announcement Looms Over Markets
Europe's Stoxx 600 Index fell hours before President Donald Trump's tariffs announcement in the White House Rose Garden, with speculation swirling over the details of the proposed trade action. Healthcare stocks were among the biggest losers as mass layoffs at the US Department of Health sowed uncertainty over the outlook for vaccines and gene therapies. Several proposals are said to be under consideration, including a tiered tariff system with a set of flat rates for countries, as well as a more customized reciprocal plan. The White House has said the tariffs would take immediate effect, but that Trump was open to subsequent negotiation. The Opening Trade has everything you need to know as markets open across Europe. With analysis you won't find anywhere else, we break down the biggest stories of the day and speak to top guests who have skin in the game. Hosted by Anna Edwards, Guy Johnson and Kriti Gupta. (Source: Bloomberg)
Bloomberg
01-04-2025
- Business
- Bloomberg
Surging Defense Stocks Led Europe's Quarter of US Outperformance
European defense stocks dominated a historic quarter of outperformance for the region's equities. And some investors are still trying to increase their positions. Armored-vehicle producer Rheinmetall AG and Thyssenkrupp AG — which has a submarine business — both saw their share prices double in the first quarter, the two members of the benchmark Stoxx 600 Index to do so. The next six best performers were all firms that stand to benefit from a surge in defense spending by European nations amid US threats to walk back its security commitment to the continent.
Yahoo
24-03-2025
- Business
- Yahoo
SAP Topples Novo to Become Europe's Biggest Listed Company
(Bloomberg) -- German software developer SAP SE unseated Danish weight-loss drug maker Novo Nordisk A/S as Europe's most-valuable public company. They Built a Secret Apartment in a Mall. Now the Mall Is Dying. Chicago Transit Faces 'Doomsday Scenario,' Regional Agency Says LA Faces $1 Billion Budget Hole, Warns of Thousands of Layoffs New York Subway Ditches MetroCard After 32 Years for Tap-And-Go Despite Cost-Cutting Moves, Trump Plans to Remake DC in His Style Shares of SAP, which have been powered by growing investor optimism over its cloud-based software, rose as much as 2.3% on Monday, valuing it at about €317 billion ($344 billion). That tipped it past Novo Nordisk, whose shares have declined 16% this year due to disappointing trials of its next-generation weight-loss shot CagriSema. SAP shares have risen 42% in the past year, fueled by an accelerating pivot from traditional on-site servers to IT infrastructure on the cloud. That process has allowed the company to sell more lucrative products bundled with artificial intelligence features, boosting revenue growth. Analysts on average estimate SAP's sales will increase 12% this year. If achieved, that would mark the company's fastest annual growth rate in the past decade. Operating profits are expected to accelerate by even more, following a restructuring program announced in January 2024. SAP has been the biggest contributor to a 30% gain in the benchmark Stoxx 600 Index since the end of 2022, according to data compiled by Bloomberg. The stock rose more than 150% during that period and was responsible for about 8% of the index's advance. SAP's steady path higher contrasts with other European blue-chip firms that have faced challenges. ASML Holding NV has been grappling with weak orders at some of its key clients, as well as tightening restrictions over chip equipment exports to China. Novo Nordisk loses top spot in Europe after its shares roughly halved since reaching a record high in June. The stock received another blow on Monday after Intron Health analysts downgraded their recommendation to sell from buy. LVMH briefly held the title of Europe's biggest listed firm in January, only for its shares to slip back as part of a broader slide in luxury-goods stocks. --With assistance from Kit Rees and Lisa Pham. (Updates with Novo Nordisk downgrade in sixth paragraph, LVMH in seventh) A New 'China Shock' Is Destroying Jobs Around the World How TD Became America's Most Convenient Bank for Money Launderers Tesla's Gamble on MAGA Customers Won't Work One Man's Crypto Windfall Is Funding a $1 Billion Space Station Dream The Real Reason Trump Is Pushing 'Buy American' ©2025 Bloomberg L.P.
