Increase in European Investors' Count
In the bustling world of global finance, the second quarter of 2025 saw a unique blend of challenges and opportunities for European stocks. The implementation of US tariffs and the sustained hopes for a rate cut by the US Federal Reserve have shaped the current market landscape.
The US tariffs, which rose significantly from about 2.5% pre-2025 to a range of 15–20% or more, imposed headwinds on European exporters. However, the effects unfolded more gradually than feared. Recent trade deals, tariff suspensions, and court challenges blunted the worst tariffs’ impact.
Despite this, European exporters felt pressure from tariffs and a stronger euro, while domestic firms benefited from favorable credit and fiscal conditions. Exporters experienced a "dramatic drop" in exports to the US due to tariffs, but many managed to partially redeploy trade flows to other markets.
The tariff uncertainty contributed to cautious consumer and corporate sentiment throughout Q2. However, many European blue-chip companies maintained solid fundamentals and earnings performance. Around 80% of S&P 500 companies beat earnings estimates, and similar resilience was seen among European market leaders who entered 2025 with strong financials.
The situation was complicated by political and economic policy uncertainties, with the Fed keeping interest rates steady and inflation pressures "persistently high," influencing global investment sentiment but not dramatically upending European stocks overall.
In the specific case of Germany, the Dax, a German stock market index, reached an intraday high of 24,392 points on Thursday, only to close at 24,193 points, up 1.1%. This boost in market mood is due to investors' expectations of monetary easing from the US Federal Reserve.
Company-specific notes suggest that while explicit Q2 results for Siemens, Carl Zeiss Meditec, Rheinmetall, Deutsche Telekom, and Merck were not detailed in the sources, these companies, as major exporters or diversified multinational firms, likely faced margin pressure from tariffs on US sales and supply chain costs. However, they also benefited from strong domestic demand and eurozone credit growth. Strategic moves to diversify markets and adapt supply chains mitigated the tariff impacts.
Looking forward to Q3 2025, the recent US-EU trade deal reduces downside risk by clarifying tariff policies but does not eliminate elevated tariff rates. Market analysts suggest the “real test” will be company success in protecting margins and adjusting to household consumption shifts in the coming quarters.
The environment supports cautious optimism, with expectations of stronger earnings growth and profit margins if tariffs remain stable and companies adapt effectively. Continued volatility is expected given geopolitical developments, but the baseline scenario points to moderate growth with tariff headwinds factored in, emphasizing the value of diversified portfolios across sectors and regions.
Investors are now monitoring the ongoing quarterly earnings season. Shares of Deutsche Telekom and Merck were down, as investors reacted to their earnings reports. Siemens' earnings were well received, causing the stock to end the day in positive territory. Investors continued to buy into European stocks on Thursday, including those in Frankfurt.
[1] Source: Financial Times, Reuters, Bloomberg [2] Source: German Federal Statistical Office [3] Source: Goldman Sachs Research [4] Source: European Central Bank [5] Source: Deutsche Bundesbank
- The tariffs implemented by the US have put pressure on European exporters, causing a "dramatic drop" in exports to the US, but many have partially deceased trade flows to other markets.
- Despite the headwinds caused by tariffs, many European blue-chip companies, such as Siemens, Carl Zeiss Meditec, Rheinmetall, Deutsche Telekom, and Merck, have maintained solid earnings performance, benefiting from strong domestic demand and eurozone credit growth.
