European markets bounce back despite renewed Trump tariff threats

European markets were optimistic on Friday morning, despite US President Donald Trump threatening to impose 200% tariffs on alcoholic products from the EU, in response to the EU’s 50% levy on whiskey. 

Britain’s FTSE 100 was trading 0.2% higher on Friday morning, with Germany’s DAX also rising 0.5%. France’s CAC 40 index advanced 0.5% on Friday as well, with the STOXX 600 index climbing 0.4%. 

The European Central Bank (ECB)’s President Christine Lagarde warned in a BBC interview this week that an escalating trade war could have significant consequences across the globe. 

“Any trade war is going to hurt the global economy. The initiator, the retaliator, the re-retaliator and so on and so forth- all of that is going to hurt growth at large. Everyone will suffer, this is a constant in the history of trade. Some countries will be hurt more than others, some countries will see inflation move more than others, but everybody is to lose as a result of that,” said Lagarde. 

 Danni Hewson, head of financial analysis at AJ Bell, said: “European drink makers are unlikely to be raising a glass to Donald Trump, after his latest threat to slap a 200% tax on wine and spirits coming into the US from the EU.”

“The rhetoric from the Trump administration is that picking on all-American brands like Harley-Davidson and Jack Daniel’s is disrespectful and the president is quite prepared to double down and indeed double up on tariffs if his first strike doesn’t hit the mark,” she continued. 

Hewson pointed out that this has caused significant uncertainty for investors, saying: “No one is quite sure where the mark is. All they know is that on any given day, trading could start one way and end up with a total volte-face.”

Kyle Chapman, FX analyst at Ballinger Group, said: “This is a market that is very much focused on the trade war as opposed to the macro data this week, and that's why the mild US inflation reports have done little to boost sentiment. That said, the mood has improved overnight as markets express relief over averting a US government shutdown.” 

February inflation reports from Germany, France and Spain were also released on Friday, while the UK released its gross domestic product (GDP) report for January. 

Asia-Pacific markets overnight

In the Asia-Pacific region, stocks were more buoyant, supported by tech bargain hunters and rising hopes of policy support. 

Japan’s benchmark Nikkei 225 closed 0.7% higher at 37,053.10 on Friday, mainly boosted by investors rushing to pick up relatively cheap technology stocks. Bank of Japan Governor Kzuo Ueda has also recently reiterated plans to slash the central bank’s growing balance sheet. 

China’s Shanghai Composite Index closed 1.8% higher at 3,419.5 on Friday, breaking a two-day losing streak. Investors were more optimistic about the prospect of increased economic support from Beijing.

Hong Kong’s Hang Seng index closed 2.1% higher on Friday, at around 23,960. 

Australia’s S&P/ASX 200 index advanced 0.5% on Friday at market close, at 7,789.7, while South Korea’s Kospi index fell 0.3% to 2,566.4. 

US markets, closing prices on Thursday

The S&P 500 closed 1.4% down on Thursday, whereas the NASDAQ 100 also dropped 1.9%. The Dow Jones Industrial Average Index closed 1.3% lower on Thursday. 

While Intel Corp and T-Mobile US Inc were some of the top performers on the NASDAQ 100 on Thursday afternoon, stocks like Atlassian Corp, Adobe Inc and Airbnb Inc lagged behind. 

However, investors were reassured somewhat by an announcement from Democratic Senator Chuck Schumer, who said that his party would be providing the votes needed to avoid a government shutdown. 

Investors also looked forward to the preliminary estimate for the March Michigan Consumer Sentiment Report due on Friday. 

Commodities and currencies

In commodities, US crude oil rose 0.9% to $67.1 per barrel on Friday morning, with Brent crude oil also advancing 0.9% to $70.4 per barrel. 

Gold was trading at record highs of $3,001.2 per ounce on Friday morning, boosted by safe haven demand. This comes amid concerns about Trump’s latest tariff threats and the lingering possibility of a peace deal between Russia and Ukraine. 

The EUR/USD pair dropped 0.2% on Friday morning, with the EUR/GBP pair rising 0.3%. 

Corporate earnings today

BMW AG announced profit before tax of around €11 billion in 2024, which was a plunge of 35.8% from the previous year, as the company continues to struggle with weaker demand from China. Pre-tax return on sales came up to 7.7% in 2024, down 30% from 2023’s 11%. 

“Like a lot of its peers, it is stuck in traffic in China where the road to customers is crowded with stronger domestic rivals. Tariffs are obviously unhelpful too, with an anticipated impact on margins, and the company has been hit by issues in its supply chain, as it was forced to suspend deliveries thanks to a faulty braking system supplied by Continental,” Russ Mould, investment director at AJ Bell, said. 

BMW’s shares fell 2.6% on the Frankfurt Stock Exchange. 

Swiss Life Holding AG revealed a net profit of CHF 1.3bn (€1.4bn) for 2024, which was a rise of 14% compared to the previous year. Adjusted profit from operations also surged 20% to around CHF 1.8bn (€1.9bn). 

The company’s share price dropped 4.6% on Friday morning on the SIX Swiss Exchange.