European equity markets experienced a welcome respite on Tuesday, opening higher after a four-day losing streak had battered investor sentiment worldwide.
The gains, however, come with a strong dose of caution, as the ongoing global tariff dispute and uncertainty surrounding US President Donald Trump’s next move continue to weigh heavily on market confidence.
As of 09:11 CET, the Stoxx 600 index was trading approximately 1% higher, with nearly every sector back in positive territory.
Major regional indexes also saw gains, including Germany’s Dax (up 1.09%), France’s CAC 40 (up 1.66%), and Italy’s FTSE MIB (up 1.66%).
In Spain, the IBEX 35 opened up 0.52%, while in London, the FTSE 100 also returned to positive territory, climbing 1.03%.
This calmer start on European markets follows a brutal trading session on Monday, although investor sentiment remains cautious as the global tariff spat and uncertainty over US President Donald Trump’s next move continues to weigh on confidence.
“Investors need to take each day as it comes, and Tuesday got off to a good start… Crude oil also increased by 1.2% to $61.45 a barrel, while gold edged 1.8% higher to $3,028 per ounce,” noted Russ Mould, investment director at AJ Bell, in an email to Euronews.
These are small wins in terms of asset movements but big wins for the state of the broader market given the bloodbath we’ve endured since ‘Liberation Day’ last week. The stabilising of markets will be welcomed with open arms.
Mould also suggested that these price movements should inject some much-needed positivity into markets, helping investors to alleviate some of the anxiety surrounding the damage to their portfolios over the past week.
“Markets could stay fragile for days and weeks to come. It would only take a new sign of aggression from Trump or a trading partner fighting back hard to cause upset again. Market recoveries can quickly lose momentum if investors lose faith in a remedy to the situation that caused the original sell-off,” Mould cautioned.
Asian markets stage a rebound, but the tension persists
Meanwhile, early Tuesday, China’s Commerce Ministry declared that it would “fight to the end” and implement unspecified countermeasures against the United States to safeguard its own interests after President Donald Trump threatened an additional 50% tariff on Chinese imports.
By early afternoon Tokyo time, the Nikkei 225 was up 5% at 32,691.34, recovering some of its recent losses.
Hong Kong also managed to regain some ground, although not nearly enough to offset Monday’s devastating 13.2% plunge, which marked the Hang Seng’s worst day since the Asian financial crisis of 1997.
The Hang Seng gained 1.6% to 20,140.78, while the Shanghai Composite index jumped 0.9% to 3,124.77.
South Korea’s Kospi edged 0.1% higher to 2,331.80, while the S&P/ASX 200 in Australia climbed 1.7% to 7,471.10.
Markets in New Zealand and Australia also saw gains.
US futures point to gains: a glimmer of hope or a false dawn?
US stock futures also climbed, with the three main benchmarks – the S&P 500, the Dow Jones Industrial Average, and the Nasdaq Composite – all up more than 1%.
This follows a mixed performance in the US session on Monday evening, where the Nasdaq managed a very small gain, while the S&P 500 was only down 0.2%.
However, analysts remain wary, questioning the sustainability of the current rebound. “I wouldn’t exactly be betting the house on a durable bounce, unless and until we get a decisive policy pivot,” Michael Brown, a senior research strategist at Pepperstone, told Euronews.
Inflection point or dead cat bounce? The market’s uncertain future
Richard Hunter, head of markets at Interactive Investor, echoed Brown’s sentiments, noting that investor skittishness and volatility remain high.
“The moves were relatively benign compared to the experience of recent days, but underneath the bonnet there were wild gyrations, with the Dow Jones index posting its largest ever intraday swing. Early reports apparently emanating from social media suggested that a pause on tariffs was imminent, which sent markets higher, only for this to be followed by a swift rebuttal from the White House which reversed any potential gains. Later comments from the President threatening to escalate tariffs even further against China kept global investors on high alert,” Hunter said in an email note to Euronews.
He further noted that the earlier falls in the prices of bonds and gold on the day were, “attributed to investors needing to raise funds for margin calls to cover their losses elsewhere.
This rotation has been seen before and can turn out to be a self-perpetuating cycle and is one which could put further pressure, if it were needed, on markets globally,”
Hunter also emphasized the difficulty in determining whether the reduced market falls represent a genuine inflection point or simply a classic “dead cat bounce.”
“The volatility within the US trading session in particular suggest that either is possible, especially since further tariff announcements will follow which could move sentiment in either direction. Indeed, many investors have noted – with some exasperation – that unlike previous crises where a confluence of factors came together to cause extreme market weakness, this set of events is largely due to the actions of just one person. To some extent, global indices are at the mercy of the President, and the growing backlash which the US is beginning to experience in terms of retaliatory tariffs and increasingly aggressive rhetoric are not even near the end of the beginning,” he cautioned.
Finally, despite finishing marginally higher on the day, the Nasdaq remains down by 19.2% so far this year and firmly in bear market territory with a decline of 23% since its relatively recent record high, further evidence the recovery may be short-lived.
Meanwhile, the S&P 500 and Dow Jones have fallen by 14% and 10.8% respectively in the year to date.
Global impact: commodities and trade relations under pressure
The analyst highlighted the ongoing reliance that Asian markets have on talks with the US to progress successfully stating, “the rally seems to be based on hopes that the talks with the US over the coming days will result in some concessions, with the economy largely dependent on exports with the States being a major and important trade partner.”
He also added, “China also ramped up its own retaliatory rhetoric and is showing little sign of succumbing to the President’s threats. It has promised its own as yet unspecified countermeasures in addition to the tariffs already announced, alongside which there is the possibility of further state stimulus to underpin the domestic economy. In any event, the outcome as it stands will be ugly and the potential for reduced demand has hit commodity prices in general, with the likes of oil already having declined by 13% this year.”
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