Summary:
The DAX 40 dropped for the fourth session, hit by financial and healthcare stocks. The EU made progress in securing trade deals with new partners.
The DAX 40 fell for a fourth straight session on Tuesday, dragged down by heavyweight financial and healthcare stocks. The EU has done well in striking preliminary deals with new partners in pursuit of trade diversification.
The 30% tariff on European goods would, if implemented, be a game-changer for Europe, wiping out transatlantic commerce and forcing a rethink of its export-led economic model.
Barclays estimate the proposed rate on EU goods including both reciprocal and sectoral duties combined with a 10% retaliation from Brussels would eat up most of the bloc's already meagre growth.
Analysts have been steadily revising down 2025 earnings forecasts for 55 consecutive weeks. Full-year earnings growth for Europe is now expected at 3%, down from 8% at the start of the year.
EPS downgrades often mean that stocks can perform well through reporting season as the bar to beat expectations is lower. Deutsche Bank noted lighter positioning in equities this time around could amplify that effect.
The euro's strength is another emerging issue. This poses a problem for the market's export-focused constituents, which derive just 40% of revenue from within Europe.
The DAX index remains supported by 50 SMA, and the double-bottom pattern indicates continued rally beyond 24,100. But the uptrend is vulnerable to headlines in the longer term.
Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
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