European Stocks Rise Amid Political Developments
By Nikhil Sharma and Pranav Kashyap
(Reuters) – European stocks closed on a positive note on Thursday, bolstered by President Donald Trump’s address to the World Economic Forum in Davos, Switzerland. However, declines in major technology stocks slightly dampened the overall gains.
Market Performance Overview
The pan-European STOXX 600 index climbed by 0.4%, settling at 530.34 points. This marks the seventh consecutive day of gains, representing the index’s longest winning streak in more than a month. Notably, the benchmark reached an all-time intraday high just a day earlier.
Impact of Trump’s Remarks
The late-session uptick in the STOXX 600 coincided with Trump’s remote speech at the World Economic Forum. In his address, he proposed an immediate reduction in interest rates and encouraged other countries to consider similar financial measures. Additionally, Trump emphasized that businesses should manufacture products in the U.S. if they wish to avoid tariffs.
Technology Stocks Experience Decline
Despite overall market positivity, technology stocks faced a setback, dropping by 1.5%. A significant contributor to this decline was ASML, a supplier of computer chip equipment, which saw its shares decrease by 4.4%. In a related setback, Puma experienced a shocking 22.8% slump as it postponed margin targets and announced cost-cutting measures after reporting disappointing annual profits.
Investor Sentiment Weighs Heavy
Investor sentiment is increasingly cautious, primarily due to Trump’s continuous protectionist rhetoric and the specter of impending tariffs on the European Union, expected by February 1. Compounding this uncertainty is the anticipation of flash PMI releases for January from key regions including the Eurozone, Germany, France, and Britain, scheduled for release on Friday.
Economic Indicators and ECB Decisions
In 2024, investors are faced with the challenge of deciphering mixed economic data that indicates a sluggish recovery while also contending with the dollar’s recent surge following the U.S. election results in November. European consumer confidence remained stable, but French industrial confidence dipped, falling to 95 points in January from December’s 97 points.
Outlook for Upcoming Monetary Policy
The European Central Bank is set to convene next week to deliberate on interest rates, with a rate cut widely anticipated. Market participants are keenly observing the commentary from the central bank regarding future actions. As Jack Allen-Reynolds, deputy chief Euro-zone economist at Capital Economics, noted, “The ECB is likely to reduce its rates next week and indicate that further cuts are probable moving forward.”
Conclusion
The landscape for European stocks remains intertwined with geopolitical developments and economic indicators. While Trump’s recent comments have injected some optimism into the market, the declines in technology stocks underscore the volatility that investors face within an uncertain economic climate. As we move forward, all eyes will be on the upcoming decisions from the European Central Bank, which will play a crucial role in shaping market sentiment.