European Stock Indices in the Red, Focus on Fed and Trump’s Restrictions

On European stock exchanges on Monday morning, the major indices were in the red as investors closely monitor the further developments surrounding the latest move by the U.S. administration regarding visas for foreign workers.

The pan-European Stoxx 600 index was down 0.2 percent around 9:30 AM, with most stock sectors, as well as regional exchanges, also in the negative.

At the same time, the Frankfurt DAX fell by 0.59 percent to 23,499 points, the Paris CAC by 0.38 percent to 7,823 points, and the London FTSE by 0.12 percent to 9,205 points.

The Trump administration unexpectedly signed an order on Friday to increase the so-called application fee for the H-1B visa to $100,000. The order, which took effect on Sunday, requires companies to pay this new six-figure fee to obtain the visas necessary for new employees entering the country.

This move is part of the administration’s efforts designed to protect American jobs and marks a further crackdown on immigration to the U.S. However, the abrupt nature of this policy change has forced many companies to begin considering what it means for their hiring plans. Large tech companies, for example, largely rely on H-1B visas to fill high-skilled positions with staff recruited from India and China.

However, the biggest declines were seen in the automotive sector, averaging a drop of 2.3 percent, led by a sharp decline in the stock price of German Porsche, down by approximately 7 percent.

This luxury vehicle manufacturer has cut its profit forecasts for this year and postponed the launch of its electric model, citing weak demand. The stock of Volkswagen, Porsche’s largest shareholder, plummeted by 5.5 percent.

Cautious in Asia

Asian markets traded cautiously on Monday, with nearly all stock indices in the positive, and the dollar slightly strengthened as traders consider the implications of the U.S. administration’s announcement regarding punitive measures for the import of foreign labor.

The MSCI Asia-Pacific index was up only 0.09 percent around 6:00 AM, while the Tokyo Nikkei rose nearly 1.5 percent, recovering losses from Friday. Most Asian stock indices were in the positive, but the Indian Nifty was slightly down by 0.1 percent, and the Hong Kong KSI by one percent.

Investor focus is on the Indian stock market and the technology sector, after the Trump administration announced on Friday that it would require companies to pay $100,000 annually for each new work permit for the H2B visa, which represents a blow to the tech industry that relies on skilled labor from India and China.

The Indian IT sector, valued at €283 billion, which generates more than half of its revenue in the U.S. market, is likely to feel the greatest short-term ‘pain’ due to deteriorating trade relations between India and the U.S.

Last month, Trump raised tariffs on imports from India by 50 percent, partly because New Delhi is purchasing Russian oil.

– This is primarily a risk to operational costs and margins. Clearly, this could also slightly raise wages and labor costs. Tech companies could also find their hands tied due to the punitive measure if they rely on foreign workers, as they will not be able to find enough workers in the U.S. – said Kyle Rodda, an analyst at Capital.com.

On the macroeconomic front, investors continue to assess what U.S. monetary policy will look like going forward, after the Fed cut interest rates last week. Traders predict that the Fed will lower interest rates by another 44 basis points by the end of the year.

Awaiting Fed Officials’ Speeches

The dollar index, which shows the value of the U.S. dollar against six major world currencies, strengthened by 0.18 percent at the start of the week, on top of last week’s 0.05 percent increase, to 97.82 points.

At the same time, the dollar strengthened against the European currency by 0.13 percent, bringing the euro exchange rate to $1.1728. Meanwhile, the dollar also rose against the Japanese yen by 0.26 percent, reaching a price of 148.32 yen.

About 10 Fed officials are expected to make statements during the week, including Chairman Jerome Powell, so investors will closely monitor their views on the economy and the independence of the Fed.

– It is possible that some of their speeches could move the currency markets. I think the most interesting could be Stephen Miran’s speech, as the markets would like to gain insight into what he thinks about the independence of the Fed and what impact the president could have, and so on – said Joseph Capurso from the Commonwealth Bank of Australia.

Miran emphasized on Friday that he is an independent policymaker after he disagreed at the September policy meeting with a sharper interest rate cut of 50 basis points and promised to elaborate on his views in a speech later on Monday.