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European equity markets reopened Tuesday to cautious trading, reflecting investor unease over rising geopolitical and monetary policy risks, particularly emanating from the United States.
Market Snapshot (07:05 GMT)
- Germany’s DAX: ▼ 0.3%
- France’s CAC 40: ▼ 0.2%
- UK’s FTSE 100: ⇔ Flat
Flight from U.S. Equities Amid Fed Turmoil
Investor flows signal a clear shift away from U.S. assets, as President Donald Trump’s escalating pressure on the Federal Reserve raises concerns over the central bank’s independence.
- According to LSEG Lipper, the week ending April 16 saw:
- $11 billion in inflows to European equity funds
- $3.6 billion to Asian funds
- A $10.6 billion outflow from U.S. equity funds
This capital rotation follows a sharp Wall Street selloff on Monday, triggered by Trump’s renewed calls for “preemptive” rate cuts and public criticism of Fed Chair Jerome Powell, whom he has threatened to remove.
“If Powell doesn’t act now, the economy will suffer,” Trump said, fueling speculation over direct White House interference in monetary policy.
The Fed held rates steady in March and signaled a cautious wait-and-see stance. Chair Powell recently noted that tariffs are likely to temporarily stoke inflation, complicating the rate outlook.
ECB Leans Dovish, More Cuts Likely
With little domestic data on the slate, attention turns to the IMF-World Bank Spring Meetings this week for broader economic signals.
The European Central Bank last week cut rates for the seventh time in a year, as the eurozone continues to grapple with:
- Weak inflation (latest reading: 2.2% YoY in March)
- A dimming growth outlook
- The impact of U.S. tariffs on European goods
ECB officials left the door open for further easing, potentially moving into uncharted territory with steeper cuts or unconventional stimulus tools if needed.
Corporate Highlights
- Roche (SIX:ROG) announced a $50 billion investment in the U.S. over five years, adding over 12,000 jobs. The Swiss pharmaceutical giant is expanding U.S. manufacturing capacity, in what may be interpreted as a move to preempt further tariff barriers.
- Mercedes-Benz (ETR:MBGn) unveiled its “Vision V”—a fully electric luxury van concept aimed at expanding its premium portfolio. The launch coincides with the brand’s strategy to fortify its top-end offerings amid a slowdown in global auto sales.
- Tesla (NASDAQ:TSLA) will report earnings later today. Investor expectations are muted following weaker-than-expected sales, geopolitical headwinds, and criticism of CEO Elon Musk’s political affiliations, which have reportedly dented brand sentiment in some key markets.
Outlook
With monetary policy credibility, geopolitical risk, and U.S. trade aggression all in sharp focus, European equities may remain under pressure despite relatively resilient flows.
Investors are likely to closely monitor:
- Trump’s next moves on Powell and the Fed
- Further developments in U.S.-China and U.S.-EU trade relations
- ECB speeches and potential signals for Q2 policy action
Volatility is expected to remain elevated, especially as key earnings from U.S. tech firms roll out and central banks weigh their next steps in an increasingly unpredictable macroeconomic environment.
