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European stock markets kicked off the week on a high note, buoyed by record gains from Wall Street and recent moves by the U.S. Federal Reserve to lower interest rates.
By 03:10 ET (08:10 GMT), key indices showed robust gains: Germany’s DAX was up 1.1%, France’s CAC 40 increased by 0.9%, and the U.K.’s FTSE 100 climbed 0.8%.
Political Uncertainty Weighs on Market Sentiment
A central concern for global investors is the reelection of Donald Trump as U.S. president. His return to power raises questions about the inflationary consequences of his proposed economic policies, which could reshape international markets. Following Trump’s victory, major U.S. indices, including the Dow Jones Industrial Average and the S&P 500, reached record highs, capping off their most successful week in a year.
This week, investors will be watching closely for the latest U.S. consumer price data. Expectations are high that these figures will bolster the case for more rate cuts from the Federal Reserve, especially after its 25 basis point reduction last week. However, Trump’s policies may complicate the central bank’s future decisions.
German Political Unrest Adds to Market Tensions
Europe is facing its own set of challenges. Germany, the region’s largest economy, is grappling with political instability that has amplified concerns about an already fragile economic landscape. The collapse of the ruling coalition comes at a delicate time, as Germany skirts the edges of a recession.
Tensions peaked when Chancellor Olaf Scholz dismissed his finance minister, a member of the Free Democrats and a key coalition partner. This political shake-up has led to speculation about a no-confidence vote in January and the possibility of snap elections in March. Adding to investor unease is the potential for higher tariffs under the renewed Trump administration, which could further impact the European economy.
Continental’s Profit Surges Despite Sales Challenges
Amid this backdrop, some European companies are delivering encouraging results. German automotive supplier Continental (ETR: CONG) saw its stock soar over 7% after announcing a better-than-expected third-quarter core profit. However, the company also issued a more cautious outlook, cutting its annual sales forecast for the second time this year. The downgrade comes as Continental contends with sluggish demand across Europe and North America.
Despite the political and economic uncertainties, European markets are displaying resilience, supported by positive signals from the U.S. and selective corporate earnings successes.
