Weekly outlook: US tariffs cause stock prices to fall

Hopes of a softer stance from the US president have been dashed as Donald Trump makes good on his tariff announcements. This brings the rally to an unexpected end.  

3 February 2025 FRANKFURT (Frankfurt Stock Exchange). The fact that US President Trump has now actually imposed high tariffs on goods from Canada, Mexico and China is not going down well at all on the stock markets. The US markets had already slipped into negative territory on Friday, and the European markets are starting the new week with significant losses. “Although interest rate speculation has recently had a supportive effect again, concerns about possible trade wars dominate in the morning,” comments Ralf Umlauf from Helaba. “All in all, a situation that clearly looks like a lose-lose scenario from an economic perspective, in which everyone involved loses a lot but gains nothing,” comments Deutsche Bank.

On Monday morning, the DAX was down a good 2 percent at 21,218 points after closing at 21,732 points on Friday. Shortly before this, the index had risen to a new all-time high of 21,800.52 points. The Stoxx Europe 600 had also reached a new historic high of 542 points. Gold and cryptocurrencies also lost ground following recent all-time highs. Gold reached a new record high of USD 2,816 per troy ounce on Friday, while Bitcoin reached over USD 109,000 two weeks ago. 

Concerns about the EU as well

“Almost half of all US imports will be affected by the higher tariffs, as in 2023 over 15 percent of all US imports came from Mexico, 13.7 percent from Canada and 13.9 percent from China,” explains economist Inga Fechner from ING. This will lead to a disruption in supply chains and could have a significant impact on the US, Canadian and Mexican economies. Given the speed with which the Trump administration has implemented election promises, it has also been difficult to imagine that the EU could escape the “tariff dance”.

“Indicators in the overbought zone”

Chart technician Christoph Geyer had already warned that a countermovement should be increasingly expected with every further upward day. “The indicators, which remain in overbought territory, should not be overestimated, but could quickly give sell signals at the start of a correction,” he explains. Falling prices are also likely in terms of seasonality.

“Too late to get in”

Markus Reinwand from Helaba has turned his attention to the clearly above-average performance of the DAX this year in an international comparison. He sees the somewhat more pronounced interest rate cut expectations for the eurozone as one reason, but this is probably not the main reason. “Rather, investors seem to be betting on the European indices, which are significantly lower valued than the S&P 500, also because the AI fantasy priced into tech stocks has been perceived as exaggerated by some investors, and not just since the 'DeepSeek quake',” explains the analyst. It is not yet time to say goodbye to shares across the board. The Helaba BEST indicator, which is designed for medium-term timing (up to five years), continues to signal “hold”. “However, it is too late to enter the market,” says Reinwand. 

Lots of company reports

The reporting season continues this week, with 78 Stoxx Europe 600 companies presenting their quarterly figures, as reported by Deutsche Bank, including BNP Paribas, Infineon, UBS, Novo Nordisk and Banco Santander. In the US, 131 S&P 500 companies reported, including Alphabet and Amazon as well as Pfizer, AMD and Uber. Apart from that, the US labor market figures on Friday are likely to be of particular interest: they are expected to provide new information on the state of the US economy and the possible development of key interest rates. 

Important economic and business events of the week:

Monday, 3. February

11.00 am. Eurozone: Consumer prices January. 

Thursday, 6. February

8.00 am. Germany: New industrial orders December. Commerzbank expects a significant increase of 4 percent compared to the previous month. However, this strong growth follows an even larger drop of 5.4 percent in November. If the strong fluctuations are factored out, incoming orders have largely moved sideways since the beginning of the year.

1.00 pm. Great Britain: Interest rate decision by the Bank of England. The Bank of England is on course to cut its key interest rate at a leisurely pace every quarter, as DekaBank explains. Now the third step down to 4.5 percent is likely to follow. Both the economic slowdown and the surprisingly significant fall in service inflation in December support this. 

Friday, 7. February

8.00 am. Germany: Industrial production December. Production in the manufacturing sector in Germany probably fell slightly at the end of the year, according to DekaBank. A clear decline in automobile production indicates this, as does the weaker Industrial Purchasing Managers' Index.

2.30 pm. USA: January unemployment figures. The unemployment rate is expected to have remained unchanged at 4.1 percent and the number of newly filled jobs is expected to have risen by 150,000, according to Deutsche Bank. 

by: Anna-Maria Borse, 3 February 2025, © Deutsche Börse AG