European stocks rebounded on Tuesday following the worst four-day drop since the COVID-19 pandemic in the wake of U.S. tariffs.
The Stoxx Europe 600 Index was up 1% by 08:46 a.m. in London, led higher by travel and leisure and industrial shares, as defense stocks rallied. Bond proxies telecoms, utilities and real estate lagged. Greece’s stock market was the best-performing in the world outside of Japan.
Among individual movers, Infineon Technologies AG shares fell as much as 3.1% after the semiconductor maker agreed to buy Marvell Technology Inc.’s automotive networking business for $2.5 billion in cash. Pandora A/S shares dropped 3.6% after JPMorgan downgraded the jewelry maker as tariffs cloud visibility for the luxury sector.
The market turmoil sparked by Trump’s wide-ranging tariffs has wiped around $1.7 trillion off Europe’s benchmark over the past three sessions, with the index now firmly in negative territory for the year. The 14-day relative strength index of the Stoxx 600 is trading well below 30, indicating it is oversold.
Trump looks set to push ahead with his agenda despite warnings from prominent Wall Street executives. On Monday, the U.S. president threatened an additional 50% tariff on China over Beijing’s escalation and to terminate all talks with the nation.
European Union trade ministers signaled readiness to deploy a full spectrum of countermeasures, including potential taxes on digital companies in response to Trump’s levies.
The worry is that an escalating trade war could plunge the US economy into a recession, with cyclical sectors such as energy, banks and financials bearing the brunt of the losses in Europe. Investors are trying to gauge whether the market has reached a trough, or if they should brace for further pain to come.
“The current situation is so fluid that it is pointless trying to predict what is going to happen next,” said Ian Lance, portfolio manager at Redwheel.” He is, however, on a lookout for buying opportunities. “Sectors that we had perhaps previously ruled out on the grounds of valuation can suddenly become interesting.”
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