European earnings may keep the mood sweet as tariff fears grow

LONDON – European companies are set to deliver a third straight quarter of profit growth, which may help to maintain newfound investor enthusiasm for the region despite political and economic turmoil and concerns over US President Donald Trump’s tariffs threat.

European stocks are trading at record highs, having outperformed Wall Street in the opening weeks of 2025, yet valuations are still rock bottom in comparison.

Investor cash has poured into the European market at the second-fastest pace in 25 years in January, according to Bank of America, even before Trump assumed the presidency and the first European company earnings began to trickle in.

Analysts are cautious, having chopped their estimates for fourth-quarter earnings growth to 1.5% from the previous year – or 4.9% excluding energy – down from an estimated 2.5% just two weeks ago, according to data from LSEG.

This would still mark the third consecutive quarter of expansion with forecasts showing both profit and sales growth for the first time since the first quarter of 2023.

“There is a high chance that if companies exceed expectations during the reporting season, share prices could rise. The potential for upside is greater than the downside,” said Matthieu Dulguerov, head of equities at REYL Intesa Sanpaolo.

However, with Trump threatening to impose tariffs on European Union imports, and political and economic uncertainty wracking the euro zone’s growth engines – France and Germany – the mood is tense.

“We think European management teams will err on the side of caution and give wide ranges considering the uncertainty and previous difficult years in Europe,” said Bernie Ahkong, CIO Global Multi-Strategy Alpha at UBS O’Connor. He cited the uncertainty around the new US administration, the Chinese economy, a key market for European exporters, and geopolitics.

Luxury bellwether LVMH reports on Tuesday, Dutch computer chip equipment maker ASML on Wednesday, and Deutsche Bank the following day. Danish drugmaker Novo Nordisk reports the week after.

LOWER BAR, EASIER BEATS

It’s early days for earnings, but already, Swiss luxury giant Richemont’s shares recorded their biggest daily rise in 16 years on Jan. 16 after fourth-quarter sales smashed expectations.

The latest surveys of business activity show the euro zone’s three largest economies – Germany, France and Italy – are stuck in an industrial recession, lagging global surveys, which have been driven by a strong US economy, thereby cushioning European earnings.

Another factor that has given European stocks a tailwind is the euro, which has lost some 4.5% in the last year.

“Many believe Europe is facing economic challenges and will have lower growth compared to the US However, most European companies are not heavily reliant on European economic growth as they operate globally,” said Dulguerov.

Goldman Sachs strategists estimate that 60% of European company revenues come from outside Europe.

European shares are trading near their largest discount on record to the S&P 500 index, at a forward price-to-earnings ratio of around 13.3, compared with 21.6 for US stocks, according to LSEG Datastream.

Many of these factors are already baked into investors’ assumptions, and for Ahkong, the commentary around full-year guidance will be key for his team taking a strong view on specific sectors.

Investors will be poring over company announcements for any clarity on the impact of Trump’s policies on results.

On Monday, Lanxess shares jumped 5.1% after the German specialty chemicals maker said it expected its fourth-quarter core profit to exceed market expectations by more than 20%, largely due to pre-buying by US customers ahead of Trump’s Jan. 20 inauguration, given his threats on tariffs.

(Reporting by Lucy Raitano; Editing by Amanda Cooper and Emelia Sithole-Matarise)

Japan’s Nikkei tracks Wall Street higher as BOJ decision looms

TOKYO – Japan’s Nikkei share average rose in early trading on Friday, buoyed by a record close for US stocks overnight.

Gains came despite a widely expected interest rate hike by the Bank of Japan later in the day.

The Nikkei added 0.3% to 40,076.88 as of 0014 GMT, with 159 of the index’s 225 components rising, versus 64 that fell and two that were flat.

The broader Topix advanced 0.2%.

On Thursday, the US S&P 500 climbed 0.5% to mark its first closing record since Dec. 6.

There is not a set time for the BOJ decision, but it tends to come after 0230 GMT, which is when Japanese markets close for the midday recess.

“The BOJ has gone to pains to guide the market towards this hike and has expressly said it wouldn’t do it if the markets were volatile at the time of the meeting,” said Kyle Rodda, senior financial market analyst at Capital.com.

“It’s very unlikely the BOJ would pull the rug from underneath the market, considering all the conditions have been met for the central bank to hike.”

(Reporting by Kevin Buckland; Editing by Alan Barona)

Dollar dips after Trump comments as markets eye tariffs, central banks

NEW YORK – The dollar was modestly lower on Thursday in a choppy session, after comments from US President Donald Trump called for lower interest rates while providing no clarity on tariffs, and investors awaited a round of policy announcements from global central banks.

The dollar is down more than 1% on the week, largely due to a sharp drop on Monday as widely expected tariff announcements from Trump failed to materialize after his inauguration. The dollar has moved only slightly in the sessions since.

The greenback swung between gains and losses on the day as Trump demanded the world drop interest rates in a speech to global business and political leaders in Davos, Switzerland. He also warned they will face tariffs should they make their products anywhere but the US

Despite frequently mentioning tariffs, Trump again declined to give specifics of any duties he intends to put in place.

“We don’t have any truly certain information to go off of, so until we have a definitive answer, we’ll continue to see a little more volatility,” said David Eng, Investment Adviser at Sonora Wealth Group in Vancouver.

“It seems like the markets are more concerned about rate cuts and any kind of greater indicator that there’ll be more rate cuts.”

Investors are awaiting a host of policy decisions from global central banks over the next week, with the Bank of Japan widely expected to raise interest rates at the end of a two-day meeting on Friday.

Rate decisions from the US Federal Reserve and European Central Bank (ECB) are scheduled for Wednesday and Thursday of next week, respectively.

Markets are pricing in a nearly 96% chance the ECB will cut rates at its meeting, with recent comments from the central bank’s policymakers indicating a cut was likely.

The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, shed 0.19% to 108.06, with the euro up 0.14% at USD 1.0422.

The greenback tumbled 1.2% on Monday in its steepest one-day slide since November 2023, as Trump’s first day in office came with a slew of executive orders but no tariffs.

The dollar had climbed to a more than two-year high of 110.17 on Jan. 13 on a resilient US economy and expectations of widespread US tariffs, which could weigh on the currencies of other countries.

Data on Thursday showed new applications for US unemployment benefits rose marginally last week, suggesting that solid job growth likely continued in January.

Trump said this week that his administration was looking into imposing a 10% tariff on goods imported from China on Feb. 1, after he earlier said Mexico and Canada could face levies of around 25% by that date. He also promised duties on European imports, without providing details.

On Monday Trump signed a trade memo ordering federal agencies to review a range of trade issues by April 1, which many market participants believe will be a key date in revealing tariff plans.

Sterling strengthened 0.31% to USD 1.2354. The Mexican peso strengthened 0.92% versus the dollar to 20.329.

The Canadian dollar gained 0.16% to C$ 1.435 per dollar. Canada’s central bank is largely expected to cut rates at its policy meeting next week after inflation data earlier this week came in below its target rate of 2%.

The Japanese yen firmed 0.33% against the greenback to 155.99. The dollar edged up 0.06% to 7.282 versus the offshore Chinese yuan.

China announced plans on Thursday to channel hundreds of billions of yuan of investment from state-owned insurers into shares.

(Reporting by Chuck Mikolajczak; Editing by Mark Heinrich and Nia Williams)

Emerging economies facing “sudden stop” of capital flows, JPMorgan warns

LONDON – Emerging markets could be seeing a dreaded “sudden stop” of capital flows as President Donald Trump’s ‘America First’ policies pump up the US economy and suck money away from poorer countries, investment bank JPMorgan warned on Thursday.

Analysts fear sudden stops in capital flows because they starve economies of the money they need to grow or even just keep going.

JPMorgan’s in-house indications show there were USD 19 billion worth of “net capital outflows” from developing economies not including China in the last quarter, with another USD 10 billion expected to flee in Q1.

“Put simply, using the widely accepted academic definition, this would signal that EM ex-China is on the verge of a sudden stop,” the bank said in a research note, adding that the phenomenon was not something “to be taken lightly”.

There are some caveats for now.

The current slowdown in capital flows is not being driven by an EM-centric event, but rather the tightening of financial conditions globally as Trump’s tariffs and tax cut pledges raise the possibility that US interest rates stay higher for longer.

With this in mind, “this is not a situation where specific EM countries are under pressure and are facing balance of payments or currency pressures as was the case in 1998-2002, 2013, 2015,” JPMorgan added.

Nor was it a case of weak US economy driving a “risk-off” worldwide sell-off. “Rather, it is one of a strong US economy and policy risks pulling flows out of EM,” analysts wrote.

How the situation plays out from here will depend on what Trump does and whether key US data on jobs, inflation, and retail sales prove strong enough to affect the Fed’s interest rate moves, JPMorgan said.

Even if a sudden stop does take hold in EM, most economies should be able to absorb that shock. JPMorgan said those most at risk were Romania, Malaysia, South Africa, and Hungary.

(Reporting by Marc Jones in London; Editing by Nia Williams)

China stocks edge up on Beijing’s plan for insurers to buy mainland shares

HONG KONG – Chinese stocks ended slightly higher on Thursday, supported by the financial sector, while Hong Kong shares closed down, as investors digested Beijing’s latest plans to encourage insurance companies to purchase shares listed on the mainland.

The blue-chip CSI300 index was up 0.2% and the Shanghai Composite Index climbed 0.5% at the close, giving up most of its early gains.

Insurance firms, banks, and the broader financial sector outperformed, rising 3.5%, 2.3% and 1.9%, respectively.

China announced further measures on Wednesday to bolster its stock market.

Under the plan jointly released by six financial regulators including the securities regulator, big state-owned insurance companies will be directed to raise the size and proportion of their investments in Chinese A-shares traded on the mainland and equity funds.

Wu Qing, head of the China Securities Regulatory Commission (CSRC), said on Thursday the plan will bring in hundreds of billions of yuan of new capital every year from state-owned insurers.

It also involves guiding mutual fund managers to increase equity funds under their management.

The measures, which follow US President Donald Trump’s threat to impose a 10% punitive duty on Chinese imports, temporarily lifted market sentiment.

But persistent concerns over US tariff threats and the outlook for domestic economic growth later offset some of the optimism.

Hong Kong’s Hang Seng Index and the Hang Seng China Enterprises Index retreated 0.4% and 0.2%, respectively.

“The implication (for the market) could be short-lived because the structural problem is still there. Most of the investors are still quite cautious at this point,” said Gary Ng, senior economist at Natixis.

Investors are unlikely to relinquish fully their preference for safe-haven assets, such as government bonds, Ng said.

Analysts also said the measures would probably only benefit certain groups of stocks.

“From an equity perspective, funds could end up increasing positions towards less volatile, larger domestic companies,” said Kai Wang, Asia equity market strategist at Morningstar, referring to high dividend stocks or large-cap companies such as Moutai.

Chinese stocks began 2025 with deep losses as investors fretted possible US tariffs would add to the pressure on a sluggish economy.

(Reporting by Summer Zhen; Editing by Jacqueline Wong, Sherry Jacob-Phillips and Barbara Lewis)

Trump policies likely to raise bond market’s inflation fears, top money managers say

NEW YORK – Giant US asset managers overseeing well over USD 20 trillion are anticipating continued price pressures because of President Donald Trump’s immigration and trade policies, a scenario that will likely keep threatening the bond market this year.

Vanguard, the world’s second-largest asset manager, which manages over USD 10 trillion, said in a first-quarter fixed income outlook report seen by Reuters that it expects “progress on inflation to stall,” with core measures of price pressures stuck above the Federal Reserve’s 2% target and above 2.5% for most of 2025.

Trade and immigration policies implemented by Trump’s Republican administration could complicate the picture further, it said in a report written by its active fixed income team, led by Sara Devereux, the global head of fixed income group.

“While our base-case outlook is positive, we emphasize that the uncertainty created by the incoming administration creates a broader range of potential outcomes for growth, inflation, and monetary policy, both domestically and abroad,” it said.

Investors are waiting for more announcements from the new administration about policies on tariffs, immigration and tax cuts. Trump, who began a second term in the White House on Monday, vowed this week to hit the European Union with tariffs and said his administration was discussing a 10% punitive duty on Chinese imports – lower than the 60% he promised during his 2024 presidential campaign.

He also said he was thinking of imposing 25% tariffs on imports from Canada and Mexico on Feb. 1.

The impact of Trump’s policies on inflation and growth will depend on their scope and sequencing, said Libby Cantrill, PIMCO’s head of public policy, and Allison Boxer, an economist at the bond-focused investment firm, which manages USD 2 trillion in assets.

But in a scenario where tariffs increase and budget deficits widen due to expected tax cuts, growth could decelerate this year while inflation rises. “In our baseline outlook, we expect modestly higher core inflation of around 20 to 40 basis points in the US in 2025,” they wrote in a note on Thursday. “The negative growth effects would likely be of a similar size.”

Vanguard also warned about the possibly negative-growth impact of tariffs, depending on their size and distribution. “Geopolitical retaliation could increase business uncertainty and further constrain growth,” it added.

RISING YIELDS

US government bond yields, which rise when prices decline, have surged over the past few months, partly in anticipation of pro-growth policies under a Trump administration which could also reignite price pressures, complicating the Fed’s efforts to bring inflation down to its target.

Benchmark 10-year yields declined marginally after Trump’s inauguration on Monday, as his tariff talk was less aggressive than feared. Yields were last at 4.65%, down from more than a one-year high of 4.8% last week but still about 100 basis points higher from September, when the Fed started easing rates.

BlackRock, the world’s largest asset manager with USD 11.6 trillion in assets, expects yields will keep rising due to a combination of higher inflation and rising government debt levels. It is bearish on long-term government bonds, expecting 10-year yields will keep rising above 5%.

“We have never before seen today’s combination of sticky inflation, higher policy rates and high and rising debt levels,” the BlackRock Investment Institute, the asset manager’s research arm, said in a note this week.

“This combination represents a fragile equilibrium supporting investor demand for long-term bonds,” it said.

(Reporting by Davide Barbuscia; Editing by Paul Simao)

Oil falls as Trump urges OPEC to lower prices

NEW YORK – Oil fell 1% on Thursday after US President Donald Trump urged Saudi Arabia and OPEC to bring down its cost during his address at the World Economic Forum.

Uncertainty over how Trump’s proposed tariffs and energy policies would affect global economic growth and energy demand also weighed on prices.

Brent crude futures settled 71 cents, or 0.9%, lower at USD 78.29 a barrel. US West Texas Intermediate crude (WTI) settled down 82 cents, or 1.09%, to USD 74.62.

Prices dipped after Trump announced he would ask Saudi Arabia and OPEC to bring down the cost of oil during his speech at the World Economic Forum in Davos, Switzerland.

“Trump’s call for lower oil prices will naturally be welcomed by consumers and businesses but received warily by the US oil industry and other global suppliers,” said Clay Seigle, senior fellow for energy security at the Center for Strategic and International Studies.

The energy industry has been calling for increased investments in global oil and gas projects, but bringing down oil prices could raise concerns about the economics of new projects, he added.

US crude oil stockpiles slipped to their lowest level since March 2022 last week even as refining activity slowed, the Energy Information Administration (EIA) said on Thursday. But the drawdown was smaller than analysts had expected. Distillate inventories also declined, while gasoline inventories rose, the EIA said.

The broader economic implications of US tariffs could further dampen global oil demand growth, said Priyanka Sachdeva, senior market analyst at brokerage Phillip Nova.

Trump has said he would add new tariffs to his sanctions threat against Russia if the country does not make a deal to end its war in Ukraine.

He also vowed to hit the European Union with tariffs and impose 25% tariffs on Canada and Mexico. On China, Trump said his administration was discussing a 10% punitive duty because fentanyl is being sent from there to the US

On Monday he declared a national energy emergency intended to provide him with the authority to reduce environmental restrictions on energy infrastructure and projects and ease permitting for new transmission and pipeline infrastructure.

There will be “more potential downward choppy movement in the oil market in the near term due to the Trump administration’s lack of clarity on trade tariffs policy and impending higher oil supplies from the US”, OANDA senior market analyst Kelvin Wong said in an email.

(Reporting by Nicole Jao, Paul Carsten, Emily Chow, and Trixie Yap. Editing by Mark Potter and Nick Zieminski)

Trump uncertainties push safe-haven gold to near all-time high

Gold prices soared to near three-month highs on Wednesday, trading just below its record peak, fuelled by a soft dollar and lack of clarity around US President Donald Trump’s policy plans, which investors fear could trigger trade wars and elevate market volatility.

Spot gold added 0.4% to USD 2,755.2 per ounce as of 02:29 p.m. ET (1629 GMT). Prices were at their highest since Oct. 31 when they hit their all-time high of USD 2,790.15.

US gold futures settled 0.4% higher at USD 2,770.90.

The dollar index dipped to a more-than-three-week low earlier in the session, making greenback-priced bullion less expensive for holders of other currencies.

“There are uncertainties with proposed tariffs and other things, and gold typically does well when there’s a large or even a moderate amount of uncertainty in the market, it’s a natural place where people gravitate to,” said Ryan McIntyre, senior portfolio manager at Sprott Asset Management.

Trump said his administration was discussing imposing a 10% tariff on goods imported from China on Feb. 1, the same day that he previously said Mexico and Canada could face levies of around 25%.

Gold is often viewed as a haven during times of economic and geopolitical turmoil, but Trump’s proposed policies are broadly regarded as inflationary, potentially compelling the US Federal Reserve to sustain elevated interest rates for an extended period to rein in rising price pressures.

Trump has not provided many details about his proposed tariffs, making investors question the aggressiveness of the move and the depth of its potential impacts.

“(Trump) has been perhaps just a shade less hawkish on tariffs as feared, which helps — less/lower tariffs is taken to indicate lower inflation hence potential for more rate cuts,” said Tai Wong, an independent metals trader.

Spot silver was steady at USD 30.86, but hovered near a one-month high it hit on Jan. 16.

Platinum rose 0.8% to USD 950.50 and palladium gained 3% to USD 987.41.

(Reporting by Anjana Anil in Bengaluru; Editing by Vijay Kishore, Krishna Chandra Eluri, and Alan Barona)

Top NYSE exec sees robust US IPO activity in 2025

DAVOS, Switzerland – A strong US economy and lower interest rates could foster a surge in the number of initial public offerings in 2025, building on the recent momentum, a top executive at the New York Stock Exchange said on Wednesday.

The change of guard at the Securities and Exchange Commission may also streamline the process to go public, potentially easing the burden for private companies weighing IPOs, the exchange’s vice president of listings and services, Chris Taylor, told the Reuters Global Markets Forum.

“There are certainly a lot of companies that are thinking about accessing public markets. Interest rates for the time being have stabilized. There’s a lot of confidence trickling within the US right now,” Taylor said, on the sidelines of the World Economic Forum in Davos, Switzerland.

The comments illustrate growing optimism in corporate boardrooms, where executives are moving forward with their IPO plans after a prolonged period of uncertainty.

An expected wave of deregulation and corporate tax cuts under the Trump administration has also boosted sentiment.

Genesys, an AI-driven developer of call center software, and Sweden’s payments giant Klarna are among the heavyweights expected to go public in the US in the next few months.

PRIVATE FOR LONGER

While the IPO market is showing signs of recovery, some of the most high-profile startups such as OpenAI and SpaceX have preferred to stay private for longer, raising money from venture capital investors instead.

Critics say the reluctance to list stems from the costly and cumbersome paperwork associated with an IPO.

Taylor said the new SEC regime could be more favorable.

“We think (public markets) are the best place for price discovery, access to capital and universal access to investment. We’re very hopeful that things will become more positive,” he said.

(Reporting by Divya Chowdhury in Davos and Niket Nishant in Bengaluru; edited by Alan Barona)

US yields rise as investors brace for volatility, await more Trump policies

NEW YORK – US Treasury yields were modestly higher in quiet trading on Wednesday, with no clear direction, as investors grew more cautious and awaited more announcements from the new administration about policies on tariffs, immigration, and tax cuts.

US President Donald Trump on Tuesday vowed to hit the European Union with tariffs and said his administration was discussing a 10% punitive duty on Chinese imports because fentanyl is being sent from China to the US via Mexico and Canada. The proposed 10% tariffs on Chinese goods, however, were far lower than the 60% duty Trump promised during his campaign.

On Monday, Trump said he was thinking of imposing 25% tariffs on imports from Canada and Mexico from Feb. 1.

The tariff threats have left the bond market in limbo and traders increasingly puzzled by the delay in action. Market participants overall were hesitant to make big bets unless Trump made more definitive policies.

Andy Wells, chief investment officer of investment management firm SanJac Alpha LP in Houston, said he thought the trend higher in Treasury yields will continue.

“It makes complete sense considering inflation is persisting. We’re looking at 3% inflation instead of 2% and we don’t think the Fed (Federal Reserve) will cut rates this year.”

“There would be a lot of volatility in the first half,” he added. “There would be a lot of whippiness in the yield curve and that means a trend upward in rates.”

In afternoon trading, the benchmark Treasury 10-year yield was up 2.7 basis points (bps) at 4.601%. Since hitting a more than one-year high of 4.809% in mid-January, the 10-year yield has declined more than 20 bps.

US 30-year yields, meanwhile, were up 1.4 bps at 4.817%.

On the front end, the two-year yield, which is typically tied to the Fed policy outlook, edged higher by 1.2 bps at 4.293%.

Byron Anderson, head of fixed income at Laffer Tengler Investments in Scottsdale, Arizona, echoed the comments by SanJac’s Wells on inflation continuing to trend higher.

He cited Trump’s aggressive stance on immigration as a potential headwind for the Federal Reserve’s goal of bringing inflation down to the 2% average.

Trump on Monday kicked off his sweeping immigration crackdown, tasking the US military with aiding border security, issuing a broad ban on asylum, and taking steps to restrict citizenship for children born on US soil.

“Depending on the deportations, and what that number actually looks like, you could put pressure on the employment market and we could see a spike in wage growth,” Laffer’s Anderson said.

The US Treasury yield curve on Wednesday, meanwhile, was little changed, with the gap between two-year and 10-year Treasury yields at 30 bps US2US10=TWEB. On Tuesday, the curve hit its flattest level since late December of 27.8 bps.

BMO Capital Markets analysts, in a research note, said the flattening could be a “modest retracement of the bear steepening that has represented the ‘go-to’ Trump trade in the US rates market.”

“While we are unquestionably on board with the bounce in Treasuries, there remains the lingering question: how far can the price action reverse in light of the inflationary angst that brought the market to the yield peaks seen last week?”

Also on Wednesday, the US Treasury successfully auctioned USD 13 billion in 20-year bonds, priced at 4.9%, lower than what the market expected at the bid deadline, suggesting solid demand.

The sale’s bid-to-cover ratio, another gauge of investor interest, was 2.75, higher than the 2.64 average.

Post-auction, US 20-year yields were up 1.4 bps at 4.889%.

(Reporting by Gertrude Chavez-Dreyfuss in New York; Editing by Hugh Lawson and Matthew Lewis)

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