European Stock Markets Decline, Investors Cautiously Await Company Reports and Earnings

On European stock exchanges, stock prices fell on Tuesday morning, losing part of yesterday’s gains, as investors cautiously await new macroeconomic reports and company earnings.

The STOXX 600 index of leading European stocks was down 0.6 percent at 9:30 AM, losing part of yesterday’s gains.

Meanwhile, the London FTSE index weakened by 0.51 percent to 8,085 points, while the Frankfurt DAX slid 0.95 percent to 19,260 points, and the Paris CAC fell 1.01 percent to 7,350 points.

Asian stock prices also fell. The Asian MSCI index was down about 1 percent at 9:30 AM, declining for the second consecutive day.

On the Tokyo Stock Exchange, the Nikkei index slipped 0.4 percent, while stock prices in Australia, Shanghai, South Korea, and Hong Kong fell between 0.3 and 2.8 percent.

Asian investors were not impressed by yesterday’s further rise on Wall Street or the new records of the local stock indices, as they fear that the new-old U.S. President Donald Trump will continue with the protectionist economic policies he pursued during his previous term.

Trump has already announced during his campaign an increase in tariffs on imports of Chinese products, which could provoke a response from China. Therefore, as during Trump’s previous term, there could be a resurgence of trade tensions between the two largest economies in the world.

“Medium-term prospects could worsen if Trump continues to aggressively raise tariffs… This could spur inflation growth, which in turn would halt the Fed’s interest rate cuts. Tariffs also carry the risk of responses from the largest trading partners,” says Vasu Menon, a director at OCBC.

Analysts estimate that Trump’s second term in the White House will result in tax cuts and deregulation, which could support stock markets.

Trump’s policies could also lead to rising inflation, prompting the U.S. central bank to halt the cycle of interest rate cuts.

As a result, the dollar has strengthened against a basket of currencies in recent days. On the other hand, the euro is under pressure due to the possibility that Trump will increase tariffs not only on imports of Chinese products but also on European goods.