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Globe and Mail
an hour ago
- Business
- Globe and Mail
European optimism grows
Only in Denmark could a country create a world-class restaurant scene, rack up countless Michelin stars, and monetize culinary tourism to near perfection – and then give the planet an appetite suppressant like Ozempic. But Scandinavia, that wind-carved crown perched atop continental Europe, has always brimmed with irony. Sweden is known as a socialist's paradise, yet overflows with billionaires. Norway, awash in some of the world's largest proven oil reserves, sold 97% electric vehicles in June. And Finland – a land of silence and saunas – now shares the longest NATO border with Russia. Whatever the case, Forstrong's CEO is back in the Danish capital of Copenhagen. Yes, the dining scene and the city's almost irritatingly perfect blend of order and bohemia – a place with no bad angles – keep us coming back to the Nordic region. And evidently, we're not alone: The city is packed and tourism is booming across the continent. But beyond the vibe, something else is stirring: European stock markets are ripping. The numbers have surprised nearly everyone. During the first half of the year, European stocks outpaced their American peers by the widest margin on record (in U.S. dollar terms) – a dramatic reversal after more than a decade in the doldrums. And it's not just equities. The euro surged 13% against the dollar over the same period. Notably, European bank stocks – those crucial barometers of liquidity and risk appetite – are leading the way. The region's Stoxx 600 Financials Index posted its strongest first half since 1997, fueled by turnaround plans and a flurry of M&A activity. Germany's Commerzbank is soaring, lifted by strong earnings and takeover interest. Spanish and Italian lenders are also rallying on renewed dealmaking. And despite the surge in prices, bank valuations still trade well below long-term norms. Berlin goes big What's driving all this? The region has seen false dawns before, and the political instability and regulatory thickets that long deterred investors haven't disappeared. Broad equity valuations in Europe remain depressed relative to the U.S. But something more profound is now underway: an unintended consequence of Trump's economic nationalism and growing military isolationism has been to galvanize Europe into fiscal action on a scale not seen since German reunification in 1991. In a defining moment for Germany – and by extension, the EU – policymakers have agreed to break from constitutional budget constraints, clearing the way for a colossal €500 billion infrastructure and defense spending plan. The measures amount to 11.4% of Germany's GDP – enough to stave off recession risks and begin rebalancing the economy away from its heavy reliance on exports. Europe's largest economy is, at long last, committing to borrow and spend massively on defense and infrastructure. And the mood shift is real: Even with plenty of skepticism still in the air, a quiet optimism is starting to take root – palpable everywhere we went. The significance of this shift can't be overstated. The Eurozone's stagnation throughout the 2010s was shaped by two powerful forces: (1) a massive deleveraging cycle in the South following the credit-fueled boom of the 2000s, and (2) self-imposed austerity in the North, which brought on the most contractionary fiscal stance since the Great Depression. Both trends have now run their course – setting the stage for a reflationary boom in the second half of the 2020s. Europe's competitiveness problem But fiscal reform is just the visible tip of a much larger iceberg. The EU's policy consensus is now shifting from a near-obsession with austerity and cost control to a broader focus on innovation and domestic demand resilience. The old orthodoxy manifested in negative interest rates, a chronically weak euro, and fragmented capital markets. It's hardly surprising that while the EU accounts for roughly 17% of global GDP, it hosts only five of the 50 largest companies in the S&P Global 1200. Innovation has been stifled for years. Of course, the elephant in the room is Trump's trade war. Everywhere we went, Europeans expressed bafflement at the fickle, capricious nature of Trump's tariffs (join the club). But the direct economic impact on Europe will be far smaller than in the U.S. The OECD has estimated that the negative GDP impact on the U.S. of 10% U.S. tariffs will be four times greater than the effect on the EU. The reason is simple: While the U.S. is less reliant on trade than Europe, Trump's tariffs would disrupt nearly all U.S. trade – whereas they apply to only roughly 20% of EU exports that go to America. EU policymakers are now strolling through an orchard of low-hanging fruit. Unlike in the U.S., the university sector remains fragmented – along with public support for research and innovation. A lack of capital scale and risk appetite has left EU funding sources far less robust than those in America. A Berlin-based startup founder put it bluntly: 'We love Europe, but if we want to grow fast, we raise funds from U.S. venture capital and scale up in the American market.' Meanwhile, the IMF recently estimated that, despite the creation of a single market, the EU still suffers from major non-tariff barriers – ranging from inconsistent regulations to licensing requirements and other non-harmonized standards. The economic impact? These frictions amount to the equivalent of a 44% tariff on goods and a staggering 110% tariff on services. Former ECB head Mario Draghi, in a scathing report last year, argued that fixing the EU's lagging competitiveness (driven by 'fragmentation, over-regulation, insufficient spending and undue conservatism') would require €750-€800 billion in additional annual investment, equivalent to 4.4%-4.7% of EU GDP. That would push the region's investment-to-GDP ratio to levels not seen since the 1970s. Notably, no one seems to disagree with Draghi. To be sure, Europe still has a long road to competitiveness. But even marginal steps can have a big impact. In the meantime, the economic cycle is already turning and showing up in the data. Credit growth is picking up. Manufacturing is stabilizing. The property sector in the North is showing early signs of life. All of this will help unlock future consumption at a time when real wage growth rose 2.9% year-over-year in Q1 2025, and Eurozone households are still saving 15.2% of disposable income – well above the pre-pandemic average of 12.8%. The bull case is that this cyclical pickup, combined with structural tailwinds, helps shore up growth in the second half of 2025 – before igniting a more powerful turnaround in 2026. Strong markets are already sniffing that out. Investment implications We wrapped up the trip in Athens before venturing into the Aegean Sea to unwind in the Greek islands (pro tip: if you're prone to seasickness, skip the smaller island-hopping boats – they're not as glamorous as they sound.) Fittingly, we were last here 25 years ago (as a young analyst working for Germany's largest bank) – the start of the last major stretch of European equity outperformance over America (2000-09), a period that coincided with the painful unwinding of the U.S. tech bubble. U.S. tech is unlikely to be headed for the same fate this time around. The mega-cap names driving U.S. returns today are posting strong earnings and sitting on piles of cash. But these companies are at that tricky stage of having to live up to the AI hype and deliver a high return on the massive amounts of capital they have been deploying. By contrast, European stocks trade at a 35% discount to their U.S. peers – yet both are expected to deliver around 10% profit growth in 2026. The risk versus reward setup is compelling. The increasingly footloose nature of global capital means that investment themes can now shift quickly. This is already happening. After years of neglect, European equity funds have attracted billions in new inflows since the start of 2025 – a sharp reversal from the outflows of last year. Forstrong's strategies are aligned with this shift, holding active overweights in both European equities and bank stocks. Investors shouldn't ignore this unfolding European Super Trend. As one Swedish executive told us: 'The cycle has finally turned. It's time to catch the wave.' Tyler Mordy, CFA, is CEO and CIO of Forstrong Global Asset Management Inc., engaged in top-down strategy, investment policy, and securities selection. This article first appeared in Forstrong's Insights page. Used with permission. You can reach Tyler by phone at Forstrong Global, toll-free 1-888-419-6715, or by email at tmordy@ Follow Tyler on X at @TylerMordy and @ForstrongGlobal. Disclaimers Content © 2025 by Forstrong Global. All rights reserved. Reproduction in whole or in part by any means without prior written permission is prohibited. Used with permission. The foregoing is for general information purposes only and is the opinion of the writer. The author and clients of Forstrong Global Asset Management may have positions in securities mentioned. Performance statistics are calculated from documented actual investment strategies as set by Forstrong's Investment Committee and applied to its portfolios mandates, and are intended to provide an approximation of composite results for separately managed accounts. Actual performance of individual separate accounts may vary with average gross 'composite' performance statistics presented here due to client-specific portfolio differences with respect to size, inflow/outflow history, and inception dates, as well as intra-day market volatilities versus daily closing prices. Performance numbers are net of total ETF expense ratios and custody fees, but before withholding taxes, transaction costs and other investment management and advisor fees. Commissions and management fees may be associated with exchange-traded funds. Please read the prospectus before investing. Securities mentioned carry risk of loss, and no guarantee of performance is made or implied. This information is not intended to provide specific personalized advice including, without limitation, investment, financial, legal, accounting or tax advice.
Saba Yemen
an hour ago
- Automotive
- Saba Yemen
European Stocks Rise Amid Optimism Over Trade Deal with the U.S.
Brussels – SABA: European stocks climbed on Wednesday, led by gains in the automotive sector, as optimism grew over a potential trade agreement with the United States following Washington's recent deal with Japan. The Stoxx 600 index rose nearly 1% to 549.6 points, recovering from three consecutive sessions of losses. Meanwhile, the UK's FTSE 100 extended its winning streak to a fifth straight session, hitting a record high. Other regional indices also advanced, with France's CAC 40 leading the gains, jumping 1.3%. The auto manufacturing sector was the top performer, surging 3.4%, tracking gains in Asian competitor stocks. Shares of Porsche soared 7.6%, while Mercedes-Benz climbed 5.8%. Swiss company Lonza was among the strongest performers, rising 5.4% after surpassing profit expectations, driven by its pharmaceutical manufacturing unit. However, shares of ASM International fell 7.7%, weighing on the tech sector and marking the biggest decline on the Stoxx 600. German software giant SAP also dropped 3.5% after reporting higher Q2 profits due to cost-cutting and increased demand but refraining from raising its full-year earnings forecast. The market rally reflects growing confidence in easing trade tensions, with investors closely watching for further developments in U.S.-Europe trade negotiations. Whatsapp Telegram Email Print more of (Economy)
Economic Times
7 hours ago
- Automotive
- Economic Times
The more deals Trump gets, the more confidence markets gain
Live Events (You can now subscribe to our (You can now subscribe to our ETMarkets WhatsApp channel The world's investors are enjoying a confidence boost after months of uncertainty as President Donald Trump finally starts signing trade stocks extended a record, risk-sensitive currencies strengthened and bonds fell after a trade agreement with Japan contained lower tariffs than Trump had threatened earlier this month. The big picture takeaway seems to be a light at the end of a negotiating tunnel that will further fuel investor optimism that the worst of their fears on trade are behind a major trading partner, the Japan deal is potentially a big step forward toward the conclusion of tariff-related uncertainties, according to Jane Foley, head of FX strategy at Rabobank.'Overall the deal will justify the market's rolling back of the fears related to US recession and inflation seen earlier in the year and should help support risk appetite,' she said. 'It raises pressure on the European trade negotiators, though at the same time it will also raise hope that they can still pull something out of the bag ahead of the deadline.'The deal with Japan sets tariffs on the nation's imports at 15%, including for autos — by far the biggest component of the trade deficit between the two countries. A separate agreement with the Philippines set a 19% rate, the same level as Indonesia agreed and a percentage point below Vietnam's 20% baseline level, signaling that the bulk of Southeast Asia is likely to get a similar the deals, effective tariff rates still remain much higher than at the beginning of the year, but below the more punitive rates suggested Topix Index rallied more than 3% to hit a one-year high, with Toyota Motor Corp. surging as much as 16%, the most since 1987. Hopes that the deal could pave the way for an agreement in Europe also boosted shares in the region, with Europe's Stoxx 600 gauge rising 1.2%, the most in a month, led by automakers such as Porsche, Volkswagen and Stellantis, each up more than 6%.Shares in other sectors such as pharma and construction — which have a big exposure to the US market — also rallied on Wednesday, while the yield on US 10-year Treasuries rose three basis points to 4.38%, halting five days of Auto Stocks Set for One of Best Days in 2025 | Porsche, Stellantis and Volkswagen among key gainersEarlier this year, Trump's rapidly-shifting tariff policies sent global markets spiraling amid recession fears and worries about the outlook for US equities, bonds and even the status of the dollar as the world's reserve currency. But risk assets have rebounded as investors saw signs of progress in negotiations and the greenback has steadied.'Since this news counters the 'Sell America' trade that was exhibited in the first 5 months of the year, if should help support short-covering in the dollar,' Rabobank's Foley deal might be setting a precedent for trade negotiations happening with Europe, according to Fabien Yip, a market analyst at IG in Australia. That will provide some optimism for global markets in their expectations for what will eventually happen with Europe and China, she said.'It looks like Trump has been making a few concessions with several key trading partners, including Vietnam, Indonesia, and now Japan,' Yip said. 'So the deal today will be quite meaningful for the global rally.'With a deal with Beijing still a key factor for the global economy, US Treasury Secretary Scott Bessent will meet his Chinese counterparts in Stockholm for their third round of trade talks aimed at extending a tariff truce and widening the discussions. European Union and US negotiators are still in intensive talks, as they seek to clinch a trade deal by Aug. 1.'Collectively, this more positive trade news has really helped to ease investor fears that tariffs are about to snap back higher on August 1,' wrote Deutsche Bank AG's Jim Reid in a note to clients. 'But of course, the threat of much higher tariffs still remains for several large economies, including the 30% on the EU, 35% on Canada and 50% on Brazil.'Mohit Kumar, the chief European strategist at Jefferies International sees trade agreements signed in the near term with the rest of the US's key trading partners.'While a negative from a macro point of view, the world can live with 15% or so tariffs,' he said.
Time of India
7 hours ago
- Business
- Time of India
The more deals Trump gets, the more confidence markets gain
The world's investors are enjoying a confidence boost after months of uncertainty as President Donald Trump finally starts signing trade deals. Global stocks extended a record, risk-sensitive currencies strengthened and bonds fell after a trade agreement with Japan contained lower tariffs than Trump had threatened earlier this month. The big picture takeaway seems to be a light at the end of a negotiating tunnel that will further fuel investor optimism that the worst of their fears on trade are behind them. Explore courses from Top Institutes in Please select course: Select a Course Category Finance PGDM MBA Degree MCA Others CXO Product Management Design Thinking Healthcare others Cybersecurity Leadership Public Policy Management Digital Marketing Technology Artificial Intelligence healthcare Project Management Operations Management Data Science Data Science Data Analytics Skills you'll gain: Duration: 9 Months IIM Calcutta SEPO - IIMC CFO India Starts on undefined Get Details Skills you'll gain: Duration: 7 Months S P Jain Institute of Management and Research CERT-SPJIMR Fintech & Blockchain India Starts on undefined Get Details As a major trading partner, the Japan deal is potentially a big step forward toward the conclusion of tariff-related uncertainties, according to Jane Foley, head of FX strategy at Rabobank. 'Overall the deal will justify the market's rolling back of the fears related to US recession and inflation seen earlier in the year and should help support risk appetite,' she said. 'It raises pressure on the European trade negotiators, though at the same time it will also raise hope that they can still pull something out of the bag ahead of the deadline.' The deal with Japan sets tariffs on the nation's imports at 15%, including for autos — by far the biggest component of the trade deficit between the two countries. A separate agreement with the Philippines set a 19% rate, the same level as Indonesia agreed and a percentage point below Vietnam's 20% baseline level, signaling that the bulk of Southeast Asia is likely to get a similar rate. Live Events After the deals, effective tariff rates still remain much higher than at the beginning of the year, but below the more punitive rates suggested previously. Japan's Topix Index rallied more than 3% to hit a one-year high, with Toyota Motor Corp. surging as much as 16%, the most since 1987. Hopes that the deal could pave the way for an agreement in Europe also boosted shares in the region, with Europe's Stoxx 600 gauge rising 1.2%, the most in a month, led by automakers such as Porsche, Volkswagen and Stellantis, each up more than 6%. Shares in other sectors such as pharma and construction — which have a big exposure to the US market — also rallied on Wednesday, while the yield on US 10-year Treasuries rose three basis points to 4.38%, halting five days of losses. European Auto Stocks Set for One of Best Days in 2025 | Porsche, Stellantis and Volkswagen among key gainers Earlier this year, Trump's rapidly-shifting tariff policies sent global markets spiraling amid recession fears and worries about the outlook for US equities, bonds and even the status of the dollar as the world's reserve currency. But risk assets have rebounded as investors saw signs of progress in negotiations and the greenback has steadied. 'Since this news counters the 'Sell America' trade that was exhibited in the first 5 months of the year, if should help support short-covering in the dollar,' Rabobank's Foley said. Japan's deal might be setting a precedent for trade negotiations happening with Europe, according to Fabien Yip, a market analyst at IG in Australia. That will provide some optimism for global markets in their expectations for what will eventually happen with Europe and China, she said. 'It looks like Trump has been making a few concessions with several key trading partners, including Vietnam, Indonesia, and now Japan,' Yip said. 'So the deal today will be quite meaningful for the global rally.' With a deal with Beijing still a key factor for the global economy, US Treasury Secretary Scott Bessent will meet his Chinese counterparts in Stockholm for their third round of trade talks aimed at extending a tariff truce and widening the discussions. European Union and US negotiators are still in intensive talks, as they seek to clinch a trade deal by Aug. 1. 'Collectively, this more positive trade news has really helped to ease investor fears that tariffs are about to snap back higher on August 1,' wrote Deutsche Bank AG's Jim Reid in a note to clients. 'But of course, the threat of much higher tariffs still remains for several large economies, including the 30% on the EU, 35% on Canada and 50% on Brazil.' Mohit Kumar, the chief European strategist at Jefferies International sees trade agreements signed in the near term with the rest of the US's key trading partners. 'While a negative from a macro point of view, the world can live with 15% or so tariffs,' he said.
CNBC
11 hours ago
- Automotive
- CNBC
Trump shifts gears to EU after striking Japan deal
U.S. President Donald Trump has now set his sights on trade negotiations with the European Union, after announcing a framework agreement with Japan. "We have Europe coming in tomorrow, and the next day, we have some other ones coming in," Trump said late on Tuesday, without specifying details. Pressure has ramped up on EU and U.S. negotiators to come to an agreement by Aug. 1, with the Trump administration appearing intent on not changing the timeline on tariffs again. Levies of 30% on U.S.-bound imports from the EU are set to come into effect next month, with countermeasures from Brussels potentially following soon after. The first tranche of retaliatory tariffs from the EU, which already target imports from the U.S. worth 21 billion euros, are currently on hold until Aug. 6, while additional recourses are being prepared. But the U.S.-Japan agreement appears to have spread a positive sentiment among experts. "The Japan deal has significantly raised hopes that the EU might also be able to reach a trade deal," Deutsche Bank Research strategists and economists said in a Wednesday note. Katsuhiko Aiba, an economist at Citi, suggested in a separate note that the finer details of Japan's agreement with the U.S. could impact negotiations with the EU. "It is notable that auto tariffs were reduced without any cap on auto exports for a major auto exporting country, which may have implications for negotiations with the EU and South Korea," he pointed out. The U.S.-Japan deal includes a baseline tariff rate of 15%, with Reuters reporting that levies on autos will also be cut to this level — down from the 25% currently in place. Carving out exemptions or lower rates for some key sectors has long been on EU's trade agreement wish list, with analysts expecting that the bloc could accept a baseline tariff in exchange for such sectoral provisions. Road vehicles are among the top three exports from the EU to the U.S., according to the European Council. The pan-European Stoxx 600 index was trading 1% on Wednesday, roughly an hour after markets opened, with autos jumping by around 3.5%. While Europe is eagerly awaiting updates on trade negotiations with the U.S., European Commission President Ursula von der Leyen and European Council President Antonio Costa are travelling to Asia. They are set to meet Japanese leaders on Wednesday before the EU-China summit on Thursday, with trade likely at top of their agenda. Trump's protectionist trade policies are exacerbating existing tensions between the EU and China, experts told CNBC. They noted Beijing's concerns that the U.S. may pressure the EU to sharpen its stance on China. EU Trade Commissioner Maros Sefcovic on Tuesday said in a post on X that he had "had an important video call" with Chinese Commerce Minister Wang Wentao, without supplying further details.
