European stock markets experienced a reversal in early trading on Tuesday, with the pan-European Stoxx 600 index turning lower after an initially positive start.
The renewed caution among investors was largely attributed to the resurfacing specter of US tariffs, following President Donald Trump’s recent pronouncements, even as market participants keenly awaited key inflation data from the eurozone which could influence the European Central Bank’s upcoming policy decision.
Shortly after the opening bell, European equities had shown some resilience, but this momentum proved short-lived.
The Stoxx 600 benchmark was trading 0.2% lower by 8:30 a.m. in London.
This negative sentiment was mirrored across major national bourses, with the UK’s FTSE 100, France’s CAC 40, and Germany’s DAX all retreating by approximately 0.1%.
The primary catalyst for this shift in mood was the return of US tariff concerns to the forefront of investors’ minds.
This follows President Donald Trump’s statement on Friday that he intends to double tariffs on steel imports from 25% to 50%, effective June 4.
This development has rekindled fears of escalating global trade tensions.
Additionally, investors are closely monitoring any new developments in the ongoing trade talks between the US and China, which appeared to sour last week.
However, a glimmer of potential dialogue emerged when National Economic Council Director Kevin Hassett suggested on Sunday that President Trump and China’s President Xi Jinping could have a conversation as soon as this week.
Inflation data and ECB policy in the spotlight
Investors in Europe are particularly focused on the latest inflation data from the eurozone, due for release today.
Flash data from the single currency area is widely expected to show that inflation cooled towards the European Central Bank’s 2% target in May.
Such a reading would likely pave the way for the ECB to deliver a widely anticipated 25 basis point interest rate cut at its next monetary policy meeting on Thursday.
It’s worth noting that eurozone inflation held steady at 2.2% in April, missing market expectations for a move lower, making today’s figures all the more crucial.
Global market backdrop: US futures dip, Asia mostly higher
Across the Atlantic, US stock futures slipped on Tuesday morning, following a positive start to June’s trading on Monday.
In Monday’s regular session, the S&P 500 climbed 0.41%, the Nasdaq Composite advanced 0.67%, and the Dow Jones Industrial Average added a modest 35.41 points, or 0.08%.
US stocks had ended Monday higher despite rising tensions between China and the United States, after Beijing countered President Trump’s accusations that it had violated a temporary trade agreement.
Investors had previously grown hopeful that the two economic giants could work out a trade deal, but recent developments suggest negotiations may be taking a turn for the worse.
Meanwhile, Asia-Pacific markets mostly rose overnight. This positive sentiment in Asia was partly attributed to data from China showing that manufacturing activity in May shrank at the fastest pace since September 2022, according to a private survey.
The Caixin/S&P Global manufacturing purchasing managers’ index (PMI) came in at 48.3, missing Reuters’ median estimate of 50.6 and dropping sharply from 50.4 in April.
This weaker-than-expected reading was influenced by a sharper decline in new export orders, highlighting the impact of prohibitive US tariffs.
In corporate news, Swiss bank Julius Baer announced plans to cut costs by an additional 130 million Swiss Francs (158.8million) by 2028 as part of its on going strategic review.
The bank stated that these new savings will be inaddition to its existing target to lower expenses by 110 million Swiss Francs (134 million), which was initially announced in February. Julius Baer now expects to exceed that original target by 20 million Swiss Francs.
Analysts largely welcomed this updated strategy from the bank’s new chief executive, Stefan Bollinger, who assumed control at the start of this year.
“The words discipline/disciplined appear a total of 19 times in the Strategy Update presentation from Julius Baer under new CEO Stefan Bollinger and this is giving the right messaging to all stakeholders given the issues over the past years, in our view,” commented JPMorgan’s Amit Ranjan in a note to clients.
Julius Baer also revealed its plans to increase gross profit margins, assets under management, and the return on its CET1 (Common Equity Tier 1) reserves.
However, some analysts noted a degree of caution in the targets.
“While targets appear conservatively struck and imply earnings below consensus, this makes sense but is likely to require evidence of a better outcome and buybacks to resume to see earnings growth and upgrades coming through,” said RBC Capital analyst Anke Reingen.
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