Oil steadies in choppy trading on tariff uncertainty, OPEC+ hike plans

HOUSTON – Oil settled largely unchanged in choppy trade on Thursday, with global benchmark Brent closing below USD 70 a barrel under pressure from tariffs between the US, Canada, and China, and plans by OPEC+ to raise output.

Brent futures settled up 16 cents, or 0.2%, at USD 69.46 a barrel. US West Texas Intermediate crude futures gained 5 cents, or 0.1%, to settle at USD 66.36.

On Wednesday, Brent hit USD 68.33, its weakest since December 2021, after a larger-than-expected build in US crude inventories further pressured oil after OPEC+’s hike in output quotas for the first time since 2022 and new US tariffs enacted on Tuesday.

“The OPEC news of adding barrels next month, along with a Russian/Ukraine peace deal now looking more promising and a flip/flop of tariffs is keeping crude in a volatile trade,” said Dennis Kissler, senior vice president of trading at BOK Financial.

Russia said it will seek a peace deal in Ukraine that safeguards its own long-term security and will not retreat from the gains it has made in the conflict.

On Thursday, US President Donald Trump exempted goods from Canada and Mexico under a North American trade pact for a month from the 25% tariffs that he imposed this week, the latest twist in fast-shifting trade policy that has whipsawed financial markets and business leaders.

A source familiar with the discussions said that Trump could eliminate the 10% tariff on Canadian energy imports, such as crude oil and gasoline, that comply with existing trade agreements.

Chinese officials have flagged that more stimulus is possible if economic growth slows, seeking to support consumption and cushion the impact of an escalating trade war with the US

Helping boost prices, meanwhile, the US will exert a campaign of maximum pressure of sanctions on Iran to collapse its oil exports and put pressure on its currency, Treasury Secretary Scott Bessent said.

The US is reviewing all existing sanctions waivers that provide Iran any degree of economic relief and urging the Iraqi government to eliminate its dependence on Iranian sources of energy as soon as possible, State Department spokesperson Tammy Bruce said.

Downside risks on demand will likely be greater than supply-side risks at this point with the additional oil coming from OPEC, said Scott Shelton, energy analyst at TP ICAP.

“Spare capacity can offset supply losses, but there is no way to fix demand, which should flounder under the weight of sanctions and underperform,” Shelton added.

The OPEC+ producer group, comprising the Organization of the Petroleum Exporting Countries and allies including Russia, decided on Monday to increase output for the first time since 2022.

One OPEC+ delegate, commenting on the market’s reaction to Monday’s decision, said the price drop looked overdone and hoped that the market was now on a “gradual recovery.”

(Reporting by Paul Carsten in London, additional reporting by Alex Lawler and Ahmad Ghaddar in London, Siyi Liu in Singapore; Editing by Marguerita Choy and David Gregorio)

Gold takes a breather as focus turns to US jobs data

Gold prices edged lower on Wednesday despite a lower dollar as investors held back from making large bets ahead of the release of US payrolls data later this week, although trade war jitters kept prices above the key level of USD 2,900 per ounce.

Spot gold was down 0.1% at USD 2,913.99 an ounce as of 01:41 p.m. EST (1841 GMT). US gold futures settled 0.2% higher at USD 2,926.

The bullion was subdued on the day despite the US dollar dropping more than 1% to a four-month low

“There’s still buying interest out there now … there’s going to be some measure of caution ahead of Friday’s (payrolls data), but the underlying trend remains favorable,” said Peter Grant, vice president and senior metals strategist at Zaner Metals.

Concerns about US President Donald Trump’s tariff measures have driven up the prices of safe-haven gold to 11 record highs this year, peaking at USD 2,956.15 on February 24, and culminating in an overall year-to-date gain of 11%.

In an address to Congress late on Tuesday, Trump said further tariffs would follow on April 2, including “reciprocal tariffs” and non-tariff actions aimed at balancing out years of trade imbalances.

That move would follow new 25% tariffs on most imports from Mexico and Canada that took effect on Tuesday, along with a doubling of duties on Chinese goods to 20%.

The ADP National Employment Report revealed a slowdown in US private payrolls growth in February, with an increase of only 77,000 jobs, below the forecast for a gain of 140,000.

Economists surveyed by Reuters are predicting US nonfarm payrolls for February will show a gain of 160,000 jobs when the data is released on Friday.

“If the number comes out really bad, I would imagine gold sells off. If it comes out neutral, I don’t think that’s going to move the needle too much. But if it comes out bullish, then gold takes off and we get pretty quick to USD 3,000, if not higher than that,” said Daniel Pavilonis, senior market strategist at RJO Futures.

Spot silver advanced 1.7% to USD 32.52 an ounce and palladium fell 0.6% to USD 936.40. Platinum gained 0.1% to USD 961.55.

(Reporting by Anmol Choubey in Bengaluru; Editing by Paul Simao and Alan Barona)

Wall Street ends higher as markets eye easing of trade tensions

Wall Street’s main indexes finished higher in choppy trading on Wednesday, as investors cheered the likely easing of trade tensions between the US and major trading partners.

Stocks turned positive after a report said President Donald Trump was considering a one-month delay of auto tariffs on Canada and Mexico. Equities extended gains after a White House announcement confirmed that Trump agreed to delay tariffs on some vehicles.

Earlier, Wall Street had lost ground following mixed economic data and as investors also worried about a trade war.

“We are on the tariff roller coaster,” said Wasif Latif, chief investment officer at Sarmaya Partners in New Jersey. “The economic data, the Fed, and all that stuff seems to have been pushed to the background for now. It’s just a reminder of how these policies have an impact in the long run and the markets are reacting to it.”

Stocks in materials, industrials, consumer discretionary and communication services were the main drivers of gains among the 11 sectors on the benchmark S&P 500. Energy and utilities were the biggest losers.

The Dow Jones Industrial Average rose 485.60 points, or 1.14%, to 43,006.59, the S&P 500 gained 64.48 points, or 1.12%, to 5,842.63 and the Nasdaq Composite gained 267.57 points, or 1.46%, to 18,552.73.

Early in the session, an ISM report showed an unexpected rise in growth in the services sector in February. However, signs of increased input prices tempered optimism.

Separately, ADP data showed private payrolls increased in February at the slowest pace in seven months. Investors now await Friday’s crucial payrolls report.

Riskier equities have sold off over the past few weeks as investors worried Trump’s trade policies would amplify inflation pressures, slow the economy, and eat into corporate profits. Multiple reports have suggested a cooling economy.

“The long-term trend that we were in, which is the rally from the pandemic lows, has basically tapped out and on top of that you put Trump, whose policies – whether it’s tariffs, deportations, or the extension of the 2017 tax cut – are all going to hurt the economy or cause inflation,” said Bill Strazzullo, chief market strategist at Bell Curve Trading in Boston.

Carmaker stocks rose, with Ford up 5.8% and General Motors up 7.2%. Tesla gained 2.6%.

Chipmaker Intel dropped 2.4% after Trump said on Tuesday that lawmakers should get rid of a law offering subsidies to the semiconductor industry.

CrowdStrike fell 6.3% after the cybersecurity firm forecast first-quarter revenue slightly below estimates.

Huntington Ingalls jumped 12.3% after Trump said his administration would create an office of shipbuilding in the White House and offer tax incentives.

Advancing issues outnumbered decliners by a 1.99-to-1 ratio on the NYSE. There were 93 new highs and 146 new lows on the NYSE.

The S&P 500 posted 3 new 52-week highs and 8 new lows while the Nasdaq Composite recorded 42 new highs and 163 new lows.

Total volume across US exchanges was 15.50 billion shares, compared with the 20-day moving average of 15.97 billion shares.

(Reporting by Johann M Cherian and Sukriti Gupta in Bengaluru and Chibuike Oguh in New York; Editing by Shinjini Ganguli and David Gregorio)

European shares recover after Germany agrees to debt rules overhaul, creates special fund

European shares bounced back on Wednesday from steep declines logged in the previous session with German stocks leading gains after the country’s leaders agreed to overhaul borrowing rules to boost defence spending and revive growth.

The continent-wide STOXX 600 recovered 0.9% after logging its worst day since August 2024 on Tuesday after US President Donald Trump’s new 25% tariffs on imports from Mexico and Canada took effect.

Germany’s blue-chip index gained 3.4%, while the midcap index soared 6.2%, logging its biggest daily gain in nearly three years.

The parties hoping to form Germany’s next government agreed to create a 500-billion-euro (USD 534 billion) infrastructure fund and overhaul borrowing rules.

Construction firms and arms makers jumped. Cement maker Heidelberg Materials rose 17.5% while construction group Hochtief advanced 15.5%, among top gainers on the STOXX 600.

Defense stocks Rheinmetall and Renk were up 7.2% and 6.8% respectively.

The construction and materials and the defense indexes gained 5.9% and 3.3% respectively, closing at record highs.

“The direct impact of increased defense spending on the economy will be positive but limited, with the upside depending on how this spending is targeted and organized,” economists at Jefferies said in a note.

“The infrastructure fund and loosening of federal debt brake is likely to have a bigger impact on growth, with wage growth and inflation likely to be stronger than anticipated.”

German long-dated bonds saw their worst sell-off in years, with yields rising across the board, and pressuring rate-sensitive sectors such as real estate and utilities, the biggest decliners.

On the tariff front, US Commerce Secretary Howard Lutnick said Trump was considering granting relief to products that comply with rules under the US-Mexico-Canada Agreement on trade, with an announcement expected later in the day.

Meanwhile, Trump said on Tuesday that Ukraine had expressed willingness to come to the
negotiating table over its conflict with Russia, rekindling hopes of a peace deal.

Investors are also watching the European Central Bank’s meeting on Thursday, where it is widely expected to deliver a 25-basis-point cut.

Among other stocks, Novo Nordisk gained 2.5% after it said it would begin selling its weight-loss drug Wegovy at a discounted price of USD 499 per month to patients paying cash.

Sports retailer Adidas closed slightly higher despite forecasting sales growth slowing slightly to up to 10% in 2025.

Bayer gained 4.1% after the drugs and farming pesticides maker raised the prospect of a return to earnings growth next year.

(Reporting by Nikhil Sharma and Purvi Agarwal; editing by Mrigank Dhaniwala, Shinjini Ganguli, and Mark Heinrich)

UPDATE 10-Oil settles down more than 2% after US crude stocks build, OPEC+ hike, US tariffs

Brent crude futures fall to their lowest since December 2021

WTI crude futures fall to lowest since May 2023

US crude stockpiles rise far more than expected, EIA data show

Canada, China retaliate against Trump tariffs

OPEC+ to increase output from April

Updates with settlement prices

By Georgina McCartney

HOUSTON, March 5 (Reuters) –
Oil prices settled down for the fourth consecutive session on Wednesday after U.S. crude oil stockpiles posted a larger-than-expected build, adding a further headwind as investors worried about OPEC+ plans to increase output in April and U.S. tariffs on Canada, China and Mexico.

Brent futures LCOc1 settled down $1.74, or 2.45% to $69.30 a barrel. U.S. West Texas Intermediate crude (WTI) CLc1 settled down $1.95, or 2.86%, to $66.31 a barrel.

Prices pared some losses after hitting multi-year lows earlier in the session – Brent sank to $68.33, its lowest since December 2021, and U.S. crude futures touched $65.22, its lowest since May 2023.

They recovered slightly after the U.S. Commerce Department chief, Howard Lutnick, said Trump would make the final decision on whether to grant any relief on tariffs to certain industries, on Bloomberg TV.

While Lutnick said the 25% tariff levied on Canada and Mexico would remain, the relief under consideration would eliminate the 10% tariff on Canadian energy imports, such as crude oil and gasoline, which comply with the rules of origin under the U.S.-Mexico-Canada Agreement, a source familiar with the discussions said.

Pulling prices down, U.S. crude stockpiles rose more than expected last week amid seasonal refinery maintenance, while gasoline and distillate inventories fell due to a hike in exports, the Energy Information Administration said.

Crude inventories rose by 3.6 million barrels to 433.8 million barrels in the week, the EIA said, far exceeding analysts’ expectations in a Reuters poll for a 341,000-barrel rise.

Brent fell more than $2 after the data was released.

“The imposition of tariffs on China, Canada and Mexico by the U.S. sparked swift reprisals from each nation that increased concerns over a slowdown in economic growth and the consequent impact on energy demand,” Ashley Kelty, an analyst at Panmure Liberum, said.

Canada and China retaliated immediately against Trump’s tariffs on Tuesday, and Mexican President Claudia Sheinbaum said the country would respond, without giving details.

JP Morgan analysts said a 100-basis-point slowdown in the U.S. GDP growth rate could potentially reduce global oil demand growth by 180,000 bpd, analysts said in a note.

OPEC+, the Organization of the Petroleum Exporting Countries and allies including Russia, decided on Monday to increase output for the first time since 2022, pressuring crude prices.

The group will make a small increase of 138,000 barrels per day from April, the first step in planned monthly increases to unwind its nearly 6 million bpd of cuts, equal to almost 6% of global demand.

“There is a bit of a concern in the market that the OPEC+ decision is the start of a series of more monthly supply additions, but the statement from OPEC+ reiterates an approach in bringing back barrels only if the market can absorb them,” UBS analyst Giovanni Staunovo said.

Analysts at Morgan Stanley Research said it was possible OPEC+ would deliver only a few monthly increases, rather than fully unwind the cuts.

The Trump administration also said on Tuesday it was ending a license that Washington granted to U.S. oil producer Chevron CVX.N since 2022 to operate in Venezuela and export its oil.

The decision puts 200,000 bpd of supply at risk, ING commodities strategists wrote in a note on Wednesday.

Meanwhile, JP Morgan analysts said global oil demand last month averaged 103.6 million bpd, marking a year-over-year increase of 1.6 million bpd, but falling short of their projected 1.8 million bpd rise for the month.

(Reporting by Georgina McCartney, Arathy Somasekhar, Jeslyn Lerh and Arunima Kumar; Editing by David Gregorio, Marguerita Choy and Deepa Babington)

((Georgina.McCartney@tr.com))

Brent settles down, hit 6-month low on OPEC+ output rise, tariffs, Ukraine news

NEW YORK – Oil prices swooned on Tuesday and settled close to multi-month lows after reports of OPEC+ plans to proceed with output increases in April and news of US tariffs on Canada, Mexico, and China as well as Beijing’s retaliatory tariffs.

Brent futures settled 58 cents lower, or 0.8%, at USD 71.04 a barrel. The session low was USD 69.75 a barrel, its lowest since September.

US West Texas Intermediate (WTI) crude fell 11 cents a barrel, or 0.2%, at USD 68.26. The benchmark previously dropped to USD 66.77 a barrel, the lowest since November.

OPEC+, the Organization of the Petroleum Exporting Countries and allies including Russia, decided on Monday to proceed with a planned April oil output increase of 138,000 barrels per day, its first since 2022.

The move took the market by surprise, said Bjarne Schieldrop, chief commodities analyst at SEB.

“The change in OPEC strategy looks like they are prioritising politics over price. Those politics are likely connected with the wheeling and dealing of Donald Trump,” Schieldrop said, referring to the US president’s calls for lower oil prices.

US tariffs of 25% on imports from Canada and Mexico took effect at 12:01 a.m. EST (0501 GMT), with 10% tariffs on Canadian energy, while tariffs on imports of Chinese goods were increased to 20% from 10%.

Analysts expect the tariffs to curb economic activity and demand for energy, weighing on oil prices.

China swiftly retaliated, announcing 10-15% increases on import levies covering a range of American agricultural and food products while also placing 25 US companies under export and investment restrictions.

Prices steadied later in the session.

Further, some geopolitical tension moderated after Ukrainian President Volodymyr Zelenskiy said he regretted last week’s extraordinary Oval Office clash with Donald Trump. Sources told Reuters the US-Ukraine minerals deal would be signed soon.

On Monday, Trump paused all US military aid to Ukraine. The move followed a Reuters report that the White House has asked the State and Treasury departments to draft a list of sanctions that could be eased for US officials to discuss during talks with Moscow.

Lifting sanctions could bring more Russian oil to market. But on Monday, Goldman Sachs analysts said Russia’s oil flows were constrained more by its OPEC+ production target than sanctions.

The bank also said higher-than-expected crude supply and a demand squeeze from softer US economic activity and tariff escalation posed downside risks to oil price forecasts.

Chinese demand is also down, with a period of refinery maintenance looming, said Josh Callaghan, head of crude derivatives at Arrow Energy Markets.

The Trump administration said on Tuesday it was ending a license that the US has granted to US oil producer Chevron since 2022 to operate in Venezuela and export its oil, after Washington accused President Nicolas Maduro of not making progress on electoral reforms and migrant returns.

Market participants now await government data on US crude stockpiles, due on Wednesday. US crude oil stocks fell by 1.46 million barrels in the week ended February 28, market sources said, citing American Petroleum Institute figures on Tuesday.

(Reporting by Stephanie Kelly in New York, Anna Hirtenstein in London, Colleen Howe in Beijing, and Emily Chow in Singapore; Editing by Emelia Sithole-Matarise, David Goodman, David Gregorio, and Deepa Babington)

Nasdaq nears correction territory dragged down by trade tensions

NEW YORK – US stocks ended lower on Tuesday, with the tech-heavy Nasdaq veering near correction territory, as trade tensions escalated following US President Donald Trump’s new tariffs on Canada, Mexico, and China.

The 25% tariffs on imports from Mexico and Canada, along with doubled duties on Chinese goods, took effect on Tuesday. China and Canada retaliated while Mexican President Claudia Sheinbaum vowed to respond likewise, without giving details.

The Nasdaq Composite ended lower after veering into correction territory during the session but pared losses in choppy trading. The index closed down 9.3% from its record closing high on December 16.

“Equity valuations have been very elevated and there’s been yellow flags all over the horizon given moves to cut government spending,” said Ben McMillan, chief investment officer at IDX Insights in Tampa, Florida. “Now on top of that, we have all this rhetoric around tariffs.”

Shares in financials and industrials were the biggest losers among the benchmark S&P 500’s 11 main sectors.

Citigroup and JPMorgan Chase & Co. fell 6.2% and nearly 4%, respectively, sending the bigger banks index down 4.7%.

The CBOE market volatility index rose 3.20% to its highest since December 20.

“The fear here is that it’s going to slow (economic) growth,” said Adam Sarhan, CEO of 50 Park Investments in New York. “And when you have a slowdown in economic conditions, it’s a situation where banks specifically make less money because fewer goods and services are traveling through the economy.”

The Dow Jones Industrial Average fell 670.25 points, or 1.55%, to 42,520.99, the S&P 500 lost 71.57 points, or 1.22%, to 5,778.15 and the Nasdaq Composite lost 65.03 points, or 0.35%, to 18,285.16.

Car makers Ford and General Motors, which have vast supply chains across North America, fell 2.9% and 4.6%, respectively. The domestically focused Russell 2000 index dropped 1%.

Wall Street is really concerned, McMillan said. “The likelihood of tariffs will lead to higher prices and therefore lower spending.”

Target shares fell 3% after the retailer forecast full-year comparable sales below estimates.

Best Buy slumped 13.3% after the electronics retailer issued a downbeat forecast, while Walgreens jumped as a report hinted that the pharmacy chain is closing in on a take-private deal by Sycamore Partners.

Declining issues outnumbered advancers by a 2.97-to-1 ratio on the NYSE. There were 86 new highs and 450 new lows on the NYSE.

The S&P 500 posted 41 new 52-week highs and 43 new lows while the Nasdaq Composite recorded 35 new highs and 595 new lows.

Total volume across US exchanges was 18.42 billion shares, compared with the 20-day moving average of 15.87 billion shares.

(Reporting by Johann M Cherian and Sukriti Gupta in Bengaluru; Editing by Maju Samuel and Richard Chang)

Gold rises on weaker dollar, trade war fears after Trump tariffs

Gold prices rose on Tuesday, driven by a weaker dollar and heightened safe-haven demand amid escalating trade conflicts following US President Donald Trump’s imposition of new tariffs.

Spot gold was up 0.6% at USD 2,911.88 an ounce as of 02:16 a.m. ET (1916 GMT). Bullion has gained nearly 11% so far this year and hit a record high of USD 2,956.15 on February 24.

US gold futures settled 0.7% higher at USD 2,920.60.

“The implementation of tariffs brings a high level of uncertainty to the markets, and safe-haven products like gold and silver continue to do well,” said David Meger, director of metals trading at High Ridge Futures.

“The dollar has been under pressure against some of the other major currencies, so that has been supportive as well,” he added.

Trump’s new 25% tariffs on imports from Mexico and Canada took effect at 0501 GMT. He also doubled duties on Chinese goods to 20%. China hit back immediately with additional 10%-15% tariffs on certain US imports from March 10 and a series of new export restrictions for designated US entities.

Canada retaliated with 25% tariffs on CUSD 30 billion worth of US imports with immediate effect on Tuesday.

The US dollar index fell 0.6%, hitting its lowest level since December and making dollar-priced gold less expensive for buyers holding other currencies.

Investors’ focus turns to the ADP employment report due on Wednesday and the US nonfarm payrolls report on Friday for clues on the Federal Reserve’s interest-rate trajectory.

Considering potential economic instability and a weakening job market, there may be a possibility of an earlier-than-expected rate cut by the Fed, Meger said.

Following three rate cuts last year, the Fed has kept rates steady. Market expectations point to a resumption of cuts in June, with a potential further reduction in September.

Spot silver was up 0.6% at USD 31.88 an ounce, platinum rose 0.9% to USD 962.30 and palladium rose 0.9% to USD 946.25.

(Reporting by Anmol Choubey in Bengaluru; Editing by Jan Harvey, Christina Fincher, and Alan Barona)

Investors brace for more volatility with Trump set to address Congress

Investors are bracing for more US stock market volatility when President Donald Trump delivers an address to Congress on Tuesday evening, on the heels of his implementation of new tariffs that rattled asset prices earlier in the day.

The president’s remarks come at a pivotal point for markets, as the post-election wave of exuberance and excitement has given way to anxiety that Trump’s policies are weighing on economic growth and contributing to inflation.

“A lot of where we are headed next really does depend on what is in this speech,” said Steve Sosnick, market strategist at Interactive Brokers. “Investors will be looking for any signs that Trump remains a friend of the markets.”

The benchmark S&P 500 has given up its gains for the year and is now in negative territory for 2025. The tech-heavy Nasdaq Composite at one point on Tuesday was down more than 10% from its mid-December peak, before recovering somewhat.

Major US stock indexes fell in a volatile session on Tuesday after Trump’s new 25% tariffs on imports from Mexico and Canada took effect, along with a doubling of duties on Chinese goods to 20%.

“Sentiment has shifted incredibly quickly from excitement about a new Trump administration to fear,” said Tim Urbanowicz, chief investment strategist for Innovator Capital Management.

“Everyone had been focused on the pro-growth policies, and I don’t think investors were taking him seriously when he talked about tariffs, but now that threat has materialized and created a growth scare.”

Jim Carroll, senior wealth advisor at Ballast Rock Private Wealth Management, noted the Cboe Volatility Index has been rising steadily in recent trading sessions. On Tuesday it briefly broke above 26, with any level higher than 20 seen as a sign that stock market participants are uneasy.

“Underneath the surface, markets have become less and less enthusiastic than the closing prints on the S&P 500 told us,” said Carroll.

Colin Graham, London-based head of multi-asset strategies for Robeco, is already preparing for still more uncertainty.

“We’ve taken off our bullish trade on the 10-year Treasury, and gone back to being neutral on stocks,” Graham said. “We’re in the camp of let’s take less risk while we see how things play out.”

(Reporting by Suzanne McGee; Editing by Chizu Nomiyama)

‘America First’ brightens European outlook: McGeever

ORLANDO – The divergence between US and European stocks this year was epitomized by the perfect symmetry in their opposing fortunes on Monday: Germany’s DAX surged 2.64%, while America’s Nasdaq slumped 2.64%.

This stark deviation really started taking root in January – not coincidentally, right around US President Donald Trump’s inauguration. A rebound in battered European assets just needed a trigger, and ironically, the chaotic implementation of Trump’s “America First” agenda appears to have provided it.

Investors initially cheered Trump’s election platform of tariffs, deregulation, tax cuts, reduced federal spending, and disdain toward multilateral institutions.

Big Tech lifted Wall Street to new peaks in early 2025, and the dollar and Treasury yields kept rising. But as the potential for a fully-fledged trade war rose, sentiment started to shift dramatically.

Meanwhile, Europe’s security vulnerabilities were starkly exposed, as Washington’s stance on the Ukraine-Russia war tilted toward Moscow. Vice President JD Vance’s Munich speech and Trump’s public slapping down of Ukrainian President Volodymyr Zelenskiy have appeared to shred US-European relations, raising existential doubts over NATO.

None of that sounds particularly positive for Europe. But the past six weeks have kicked the continent into coordinated action that could see Germany create a 500 billion euro (USD 529.90 billion) infrastructure fund and the European Union mobilize close to 1 trillion euros for defense, security, and infrastructure.

That’s the level of growth-boosting spending that many analysts have been urging Europe to pursue for decades. If it materializes, it would be a game-changer.

TABLES HAVE TURNED

So the ‘US exceptionalism’ narrative is fading and being replaced by the European recovery story.

“When you get a meaningful correction in risk assets from US policy instability, that naturally translates into the relative outperformance of unloved assets,” like Europe, notes Benn Eifert, managing partner at San Francisco-based hedge fund QVR Advisors. “There’s much, much more room to go.”

It won’t be a linear move. Europe’s growth is fragile, the region is likely to come under Trump’s tariff line of fire soon, and Germany’s Dax recoiled 3.5% on Tuesday – its steepest fall in exactly four years – as trade war fears rattled global markets.

But the bullish US/bearish Europe dance that markets have seen over the last few years looks to be over. Allocations to the US, the ‘American exceptionalism’ narrative, and Wall Street valuations simply became too extreme. Unloved, under-owned Europe was the negative mirror image.

So the tables are turning now.

The gap between Citi’s euro zone and US economic surprises index is close to the widest and most euro-positive in two years. And the gap between year-ahead annual growth forecasts for the US and EU, which was a full percentage point recently, according to Morgan Stanley economists looks set to shrink.

Capital is flowing accordingly. After years of near-consistent outflows, European equity funds are drawing in the biggest inflows since 2022, Bank of America figures show, while the record inflows into US equity of last year are drying up.

These are historic times. America’s security backstop for Europe and commitment to free trade are no longer givens. And we could be about to see the biggest shift in global trade relations since the collapse of Bretton Woods, and most dramatic shift in German fiscal policy since re-unification.

No one knows how things will play out, but right now Europe looks to be benefiting from this ‘America first’ administration more than many would have thought. Maybe even more than the US

(The opinions expressed here are those of the author, a columnist for Reuters.)

(USD 1 = 0.9436 euros)

(Reporting and Writing by Jamie McGeever; Editing by Bill Berkrot)

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