Latest news with #MaxCastelli
Reuters
6 days ago
- Business
- Reuters
European stocks' 2025 outperformance is over, but don't forget the euro
LONDON, July 7 (Reuters) - European stocks took an early lead in 2025, outperforming Wall Street thanks to erratic U.S. policymaking and Germany's once-in-a-generation fiscal shift, but U.S. markets have caught up. The broad European STOXX 600 index was up 6.6% so far this year, as of Friday's close, compared with 6.8% for the S&P 500. (.STOXX), opens new tab, (.SPX), opens new tab In March the STOXX was 10 percentage points ahead, leading European bulls to think this might be their time after years of European markets underperforming Wall Street. Calls for European outperformance still ring true in currencies, however, with the euro up 14% against the dollar year to date. Trade talks and the new U.S. tax-cut and spending law are tests for the rotation out of the U.S. and into Europe, said UBS Asset Management's head of global sovereign markets strategy Max Castelli. "I don't think U.S. exceptionalism will come back with the same strength and intensity," he said. "But I would not rule out the big period of outperformance of European assets over the U.S. being over." Here's a look at how Europe's performance against the U.S. stacks up. Marija Veitmane, head of equity research at State Street Global Markets, said Wall Street shares started bouncing back in mid-April, partly because the "trade war became trade negotiations." But the "real turning point" was corporate earnings season when "tech CEOs stood up and said 'Our earnings are going to be very strong'." Tech (.SPLRCT), opens new tab accounts for roughly one-third of the S&P 500, (.SPX), opens new tab and the sector is up 24% since the start of April, even including its plunge when U.S. President Donald Trump announced his tariff plans. Nvidia, once again the world's largest company by market cap, has risen an even more dramatic 45%, and there isn't anything in Europe to match. (NVDA.O), opens new tab But by no means all investors are rushing back to Wall Street with the S&P 500 at record highs, suggesting valuations are getting stretched. "The tariff announcement showed how fast sentiment can change and how risky these high (U.S.) valuations are," said Madeleine Ronner, senior equity portfolio manager at asset manager DWS, adding that European valuations are more reasonable. And while that gap had been appropriate because of slow corporate earnings growth, "Europe's (earnings per share) is starting to grow again, and the differential is getting smaller, which should be reflected in valuations," she said. DWS sees U.S. and European GDP growth being roughly similar in 2025 and 2026, a further and sustainable boost to European companies' earnings. Investors have snapped up European stocks, but that has centred largely on the same sectors -- defence (.SXPARO), opens new tab, up 50% this year, and banks (.SX7P), opens new tab up 28%, suggesting a lack of faith in the broader market. The two account for more than 50% of the return of the STOXX 600, despite making up just 16% of the index, BNP Paribas Exane estimates. That's not surprising as NATO members have agreed to increase defence spending, and massively in the case of Germany. But valuations are stretched. Germany's Rheinmetall ( opens new tab trades on a forward price to earnings ratio of more than 50; even Apple (AAPL.O), opens new tab and Microsoft (MSFT.O), opens new tab are only around 30. The picture is clearer in currencies, where the euro is at a near four-year high and closing in on $1.20. At the start of the year many analysts predicted the euro would fall below one dollar, thanks to what was then seen as an insatiable demand for U.S. assets. But when this reversed, the euro began to appreciate, a move that grew as foreign holders of U.S. stock and bonds, fearing further dollar weakness, increased their currency hedges. Now the euro is expected to keep gaining even if outflows from the U.S. stop. "Foreigners don't need to sell U.S. assets to weaken the dollar but merely to say 'No thank you' to buying more," Deutsche Bank's head of FX strategy George Saravelos said in a note. That currency move also affects equity investors, making European stocks cheaper for U.S. investors and Wall Street more expensive from Europe. The S&P 500 may be at a record high for domestic investors, but priced in euros it's 9% off its February top. "For euro-based investors the currency ate up so much U.S. assets' returns this year," said DWS' Ronner. "If there's another letdown, in euros that gets even worse." On the other hand, the STOXX 600 in local currency terms is still shy of March's record, but priced in dollars it hit an all-time high in late June.
Yahoo
6 days ago
- Business
- Yahoo
European stocks' 2025 outperformance is over, but don't forget the euro
By Alun John LONDON (Reuters) -European stocks took an early lead in 2025, outperforming Wall Street thanks to erratic U.S. policymaking and Germany's once-in-a-generation fiscal shift, but U.S. markets have caught up. The broad European STOXX 600 (^STOXX) index was up 6.6% so far this year, as of Friday's close, compared with 6.8% for the S&P 500 (^GSPC). In March the STOXX was 10 percentage points ahead, leading European bulls to think this might be their time after years of European markets underperforming Wall Street. Calls for European outperformance still ring true in currencies, however, with the euro up 14% against the dollar year to date. Trade talks and the new U.S. tax-cut and spending law are tests for the rotation out of the U.S. and into Europe, said UBS Asset Management's head of global sovereign markets strategy Max Castelli. "I don't think U.S. exceptionalism will come back with the same strength and intensity," he said. "But I would not rule out the big period of outperformance of European assets over the U.S. being over." Here's a look at how Europe's performance against the U.S. stacks up. Marija Veitmane, head of equity research at State Street Global Markets, said Wall Street shares started bouncing back in mid-April, partly because the "trade war became trade negotiations." But the "real turning point" was corporate earnings season when "tech CEOs stood up and said 'Our earnings are going to be very strong'." Tech accounts for roughly one-third of the S&P 500, and the sector is up 24% since the start of April, even including its plunge when U.S. President Donald Trump announced his tariff plans. Nvidia (NVDA), once again the world's largest company by market cap, has risen an even more dramatic 45%, and there isn't anything in Europe to match. But by no means all investors are rushing back to Wall Street with the S&P 500 at record highs, suggesting valuations are getting stretched. "The tariff announcement showed how fast sentiment can change and how risky these high (U.S.) valuations are," said Madeleine Ronner, senior equity portfolio manager at asset manager DWS, adding that European valuations are more reasonable. And while that gap had been appropriate because of slow corporate earnings growth, "Europe's (earnings per share) is starting to grow again, and the differential is getting smaller, which should be reflected in valuations," she said. DWS sees U.S. and European GDP growth being roughly similar in 2025 and 2026, a further and sustainable boost to European companies' earnings. Investors have snapped up European stocks, but that has centred largely on the same sectors — defence, up 50% this year, and banks up 28%, suggesting a lack of faith in the broader market. The two account for more than 50% of the return of the STOXX 600, despite making up just 16% of the index, BNP Paribas Exane estimates. That's not surprising as NATO members have agreed to increase defence spending, and massively in the case of Germany. But valuations are stretched. Germany's Rheinmetall trades on a forward price to earnings ratio of more than 50; even Apple and Microsoft are only around 30. The picture is clearer in currencies, where the euro is at a near four-year high and closing in on $1.20. At the start of the year many analysts predicted the euro would fall below one dollar, thanks to what was then seen as an insatiable demand for U.S. assets. But when this reversed, the euro began to appreciate, a move that grew as foreign holders of U.S. stock and bonds, fearing further dollar weakness, increased their currency hedges. Now the euro is expected to keep gaining even if outflows from the U.S. stop. "Foreigners don't need to sell U.S. assets to weaken the dollar but merely to say 'No thank you' to buying more," Deutsche Bank's head of FX strategy George Saravelos said in a note. That currency move also affects equity investors, making European stocks cheaper for U.S. investors and Wall Street more expensive from Europe. The S&P 500 may be at a record high for domestic investors, but priced in euros it's 9% off its February top. "For euro-based investors the currency ate up so much U.S. assets' returns this year," said DWS' Ronner. "If there's another letdown, in euros that gets even worse." On the other hand, the STOXX 600 in local currency terms is still shy of March's record, but priced in dollars it hit an all-time high in late June.
Yahoo
6 days ago
- Business
- Yahoo
European stocks' 2025 outperformance is over, but don't forget the euro
By Alun John LONDON (Reuters) -European stocks took an early lead in 2025, outperforming Wall Street thanks to erratic U.S. policymaking and Germany's once-in-a-generation fiscal shift, but U.S. markets have caught up. The broad European STOXX 600 index was up 6.6% so far this year, as of Friday's close, compared with 6.8% for the S&P 500. In March the STOXX was 10 percentage points ahead, leading European bulls to think this might be their time after years of European markets underperforming Wall Street. Calls for European outperformance still ring true in currencies, however, with the euro up 14% against the dollar year to date. Trade talks and the new U.S. tax-cut and spending law are tests for the rotation out of the U.S. and into Europe, said UBS Asset Management's head of global sovereign markets strategy Max Castelli. "I don't think U.S. exceptionalism will come back with the same strength and intensity," he said. "But I would not rule out the big period of outperformance of European assets over the U.S. being over." Here's a look at how Europe's performance against the U.S. stacks up. BIG TECH IS BACK Marija Veitmane, head of equity research at State Street Global Markets, said Wall Street shares started bouncing back in mid-April, partly because the "trade war became trade negotiations." But the "real turning point" was corporate earnings season when "tech CEOs stood up and said 'Our earnings are going to be very strong'." Tech accounts for roughly one-third of the S&P 500, and the sector is up 24% since the start of April, even including its plunge when U.S. President Donald Trump announced his tariff plans. Nvidia, once again the world's largest company by market cap, has risen an even more dramatic 45%, and there isn't anything in Europe to match. HOLD YOUR NERVE But by no means all investors are rushing back to Wall Street with the S&P 500 at record highs, suggesting valuations are getting stretched. "The tariff announcement showed how fast sentiment can change and how risky these high (U.S.) valuations are," said Madeleine Ronner, senior equity portfolio manager at asset manager DWS, adding that European valuations are more reasonable. And while that gap had been appropriate because of slow corporate earnings growth, "Europe's (earnings per share) is starting to grow again, and the differential is getting smaller, which should be reflected in valuations," she said. DWS sees U.S. and European GDP growth being roughly similar in 2025 and 2026, a further and sustainable boost to European companies' earnings. CAN YOU BUY MORE DEFENCE STOCKS? Investors have snapped up European stocks, but that has centred largely on the same sectors -- defence, up 50% this year, and banks up 28%, suggesting a lack of faith in the broader market. The two account for more than 50% of the return of the STOXX 600, despite making up just 16% of the index, BNP Paribas Exane estimates. That's not surprising as NATO members have agreed to increase defence spending, and massively in the case of Germany. But valuations are stretched. Germany's Rheinmetall trades on a forward price to earnings ratio of more than 50; even Apple and Microsoft are only around 30. LOVING THE EURO The picture is clearer in currencies, where the euro is at a near four-year high and closing in on $1.20. At the start of the year many analysts predicted the euro would fall below one dollar, thanks to what was then seen as an insatiable demand for U.S. assets. But when this reversed, the euro began to appreciate, a move that grew as foreign holders of U.S. stock and bonds, fearing further dollar weakness, increased their currency hedges. Now the euro is expected to keep gaining even if outflows from the U.S. stop. "Foreigners don't need to sell U.S. assets to weaken the dollar but merely to say 'No thank you' to buying more," Deutsche Bank's head of FX strategy George Saravelos said in a note. CURRENCIES MATTER That currency move also affects equity investors, making European stocks cheaper for U.S. investors and Wall Street more expensive from Europe. The S&P 500 may be at a record high for domestic investors, but priced in euros it's 9% off its February top. "For euro-based investors the currency ate up so much U.S. assets' returns this year," said DWS' Ronner. "If there's another letdown, in euros that gets even worse." On the other hand, the STOXX 600 in local currency terms is still shy of March's record, but priced in dollars it hit an all-time high in late June.
Time of India
24-06-2025
- Business
- Time of India
Global central banks shift from dollar to gold and euro, says OMFIF survey, as Trump's tariffs shake safe-haven appeal
AI image Global central banks managing around $5 trillion in reserves are preparing to reduce their reliance on the US dollar, turning instead to gold, the euro and China's yuan, according to a survey by the Official Monetary and Financial Institutions Forum (OMFIF). The OMFIF survey, conducted between March and May across 75 central banks, found that a net 33% of reserve managers plan to increase their gold holdings over the next one to two years—the highest reading in at least five years. 'After years of record-high central bank gold purchases, reserve managers are doubling down on the precious metal,' OMFIF stated, as quoted by Reuters. The shift comes in the wake of US President Donald Trump's sweeping April 2 'Liberation Day' tariffs, which triggered market turmoil and weakened the dollar's safe-haven appeal. As per the survey, 70% of central banks said the US political environment was discouraging them from investing in the greenback, more than double the share from a year ago. The dollar, which topped last year's currency preference list, fell to seventh place in the 2025 rankings. Meanwhile, a net 16% of central banks plan to increase euro holdings over the next 12–24 months, followed by the yuan. Over a decade, the yuan's share of global reserves is expected to triple to 6%, with a net 30% of central banks planning to raise their exposure. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like 2025 Top Trending local enterprise accounting software [Click Here] Esseps Learn More Undo Reserve managers also expressed optimism about the euro regaining ground lost since the 2011 sovereign debt crisis. Citing improved sentiment, three sources familiar with central bank strategy told Reuters that the euro could recover to a 25% reserve share by 2030, from around 20% now. UBS Asset Management's Max Castelli said many central banks reached out after Trump's tariff announcement to ask if the dollar's haven status was in question. 'As far as I remember, this question has never been asked before—not even during the 2008 financial crisis,' Castelli told Reuters. The average projected share of the dollar in global FX reserves by 2035 was 52%, down from its current 58%, according to the OMFIF survey. Harvard professor and former IMF chief economist Kenneth Rogoff told Reuters via email, 'The euro's share of global reserves will almost surely rise over the next few years, not so much because Europe is viewed more favourably, but because the dollar's status is diminished.' Bernard Altschuler, global head of central bank coverage at HSBC, said the euro is the 'only real alternative currency' to the dollar at present and added that a 25% reserve share is realistic within 2–3 years, provided the EU expands its bond markets and integrates capital markets more deeply. Francesco Papadia, senior fellow at think tank Bruegel and former ECB market operations chief, also told Reuters that reserve managers are increasingly open to holding more euros. Zhou Xiaochuan, former governor of the People's Bank of China, added that the euro's reserve status can grow but noted Europe still has 'homework to do'. Europe's efforts to reduce US dependence—such as higher joint defence spending and capital market reforms—could accelerate the currency shift. Public pension and sovereign wealth funds surveyed also rated Germany as the most attractive developed market for investments. The Reuters report also noted that the dollar's declining appeal is being closely watched by policymakers amid the broader reshaping of global trade, financial flows and geopolitical alignments. Stay informed with the latest business news, updates on bank holidays and public holidays . AI Masterclass for Students. Upskill Young Ones Today!– Join Now
Economic Times
24-06-2025
- Business
- Economic Times
Central banks eye gold, euro, yuan as dollar dominance wanes
Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads Popular in International Tired of too many ads? Remove Ads The custodians of trillions of dollars of global central bank reserves are eyeing a move away from the greenback into gold, the euro and China's yuan as the splintering of world trade and geopolitical upheaval spark a rethink of financial to a report by the Official Monetary and Financial Institutions Forum (OMFIF) due to be published later on Tuesday, one in three of 75 central banks managing a combined $5 trillion plan to increase exposure to gold over the next one-to-two years after stripping out those planning to decrease, the highest in at least five years. The survey -- carried out between March and May -- gives a first snapshot of the repercussions of U.S. President Donald Trump's April 2 Liberation Day tariffs that sparked market turmoil and a slide in the safe-haven dollar and U.S. Treasuries. Gold, which central banks have already been adding at a record pace, was seen benefiting even further longer term, with a net 40% of central banks planning to increase gold holdings over the next decade."After years of record-high central bank gold purchases, reserve managers are doubling down on the precious metal," OMFIF dollar, the most popular currency in last year's survey, fell to seventh place this year, OMFIF said, with 70% of those surveyed saying the U.S. political environment was discouraging them from investing in the dollar -- more than twice the share a year currencies, the euro and yuan stand to benefit the most from a diversification away from the dollar.A net 16% of central banks surveyed by OMFIF said they plan to increase euro holdings over the next 12 to 24 months, making it the most in-demand currency, up from 7% a year ago, followed by the yuan. But over the next decade, the yuan is more favoured, with a net 30% of central banks expecting to increase holdings and its share of global reserves seen tripling to 6%.Separately, three sources who deal directly with reserve managers, told Reuters they saw the euro as now having the potential to recapture the share of currency reserves lost following the 2011 euro debt crisis by the end of this decade. They cited more positive sentiment among reserve managers towards the euro following Liberation would mean a recovery to a roughly 25% share of currency reserves, from around 20% currently, representing a key moment in the bloc's recovery from the debt crisis that threatened the euro's existence. Max Castelli, head of global sovereign markets strategy and advice at UBS Asset Management, told Reuters that reserve managers made many calls after Liberation Day to ask if the dollar's safe-haven status was at risk."As far as I remember, this question has never been asked before, not even after the great financial crisis in 2008."The average expectation for the dollar's share of global FX reserves in 2035 was 52%, the OMFIF survey showed, remaining the No.1 reserve currency but seen down from the current 58%.OMFIF survey respondents expected the euro to reach about a 22% share of global reserves in 10 years' time."The euro's share of global reserves will almost surely rise over the next few years, not so much because Europe is viewed so much more favorably, but because the dollar's status is diminished," said Kenneth Rogoff, Harvard professor and former IMF chief economist, told Reuters by e-mail ahead of OMFIF's Europe could attract a higher share of reserves sooner if the bloc is able to boost its pile of bonds that are currently dwarfed by the $29 trillion U.S. Treasury market, while integrating its capital markets, the sources that speak directly to reserve managers, told Reuters. ECB President Christine Lagarde has also urged action to bolster the euro as a viable dollar euro is the "only real alternative currency for the moment to make a significant change in the level of reserves," said Bernard Altschuler, global head of central bank coverage at HSBC, adding he saw it as "realistic" for the euro to reach a 25% share of global reserves in 2-3 years if those issues are European Union is the world's largest trading bloc. Its economy is far bigger than the dollar's other rivals. Capital controls limit the appeal of the for change has gathered pace, with Europe signalling willingness to curb its dependence on the U.S. by boosting defence spending, including through more joint EU borrowing. Germany is ramping up spending, while the EU is trying to revive efforts to integrate its capital pension and sovereign wealth funds, also surveyed by OMFIF, saw Germany as the most attractive developed Asset Management's Castelli said he was receiving many more questions about the euro, estimating the euro could recover to a 25% share of reserves by the end of the the most bullish end, Francesco Papadia, who managed the ECB's market operations during the debt crisis, estimated the euro could recover to 25% in as soon as two managers he holds discussions with were more willing to look at the euro than before, Papadia, senior fellow at think-tank Bruegel, said. Zhou Xiaochuan, China's central bank chief from 2002 to 2018, agreed the euro's role as a reserve currency could grow. However, there's "homework to do," he told Reuters on the sidelines of a recent conference.
