Stocks in Europe End Day in Negative Territory Due to Tariff Worries and Moderate Earnings Reports
In the ever-evolving global market landscape, European equities have demonstrated strong resilience and outperformance in 2025. On July 17 alone, the German DAX rose by 1.51% to 24,370.93 points, the French CAC 40 increased by 1.29% to 7,822.00 points, and the British FTSE also saw gains, up 0.52% to 8,972.64 points, despite a slight decline in the Russian RTS Index by 0.85%[1].
This year's notable outperformance of the MSCI Europe Index, up 24.0% year-to-date compared to the S&P 500's 6.2%, marks the best relative performance since its inception in 1986. A key driver behind this growth has been the weakening of the U.S. dollar against the euro and other currencies, which accounts for over 60% of MSCI Europe's gains in U.S. dollar terms. This currency decline is linked to concerns about rising U.S. fiscal debt and uncertainty over U.S. tariff policies under President Donald Trump[3].
President Trump's global tariff war has accelerated a rotation towards European markets, which benefited from lower interest rates, falling inflation, and improving economic fundamentals. This shift has helped European stocks outperform their U.S. counterparts[2]. Fund managers expect continued momentum into the second half of 2025, bolstered by Germany’s increased spending plans anticipated to boost EU industry, and investor interest in utilities and defense sectors against a backdrop of rising European indexes and a strengthening euro[2].
However, not all European companies have enjoyed the same success. Renault, for instance, tanked nearly 19% in the French market after issuing a profit warning and reporting first-half figures that fell short of expectations[4]. Hiscox also closed lower by about 2.6% in the UK market[5].
In the UK, inflation remains a concern, with the Bank of England maintaining a cautious stance and expecting future rate cuts to stimulate the economy. Targeted government spending, particularly in housing, is seen as a potential lift to UK economic growth[2].
Overall, while geopolitical risks and trade tensions persist, European equity markets have capitalized on favourable currency shifts, economic policy, and company-specific movements, maintaining their lead over U.S. stocks in 2025[1][2][3].
Here's a summary of the current status and performance:
| Aspect | Status/Performance | |--------------------------|------------------------------------------| | European stocks | Strong performance: DAX +1.51%, CAC 40 +1.29%, FTSE +0.52% (July 17, 2025) | | MSCI Europe Index | +24% YTD, best-relative to S&P 500 since 1986, helped by euro strength and dollar weakness | | Tariffs & Trump | Tariff wars under Trump accelerated flow into European equities, helped by falling U.S. dollar | | Fed Chair Jerome Powell | Not directly mentioned, but U.S. interest rates falling supports eurozone growth | | Renault | Issued profit warning affecting stock sentiment | | ASML and Volkswagen | Important market players with ongoing investor focus | | UK Inflation & BoE | UK inflation remains a concern; BoE considering rate cuts to support sluggish growth and government spending targets housing sectors |
[1] Source: Bloomberg [2] Source: Reuters [3] Source: Financial Times
In the context of advising an individual interested in investing, two sentences could be:
- Given the strong performance of European equities, such as the DAX, CAC 40, and FTSE, this year, allocating some of your portfolio to European stocks could be a wise choice, particularly with the continued momentum expected in the second half of 2025.
- While geopolitical risks and trade tensions persist, European equity markets, as a result of favorable currency shifts, economic policy, and company-specific movements, have demonstrated resilience and outperformance over U.S. stocks in 2025, making them an appealing option for long-term investors.
