Trade uncertainty intensifies, European stocks decline on Monday

Investing.com - European stock markets edged lower on Monday, as increased uncertainty surrounding U.S. trade tariffs dampened market risk appetite at the start of a new week.

As of 03:02 AM Eastern Time (16:02 Beijing Time), Germany’s DAX index was down 0.6%, France’s CAC 40 index declined 0.2%, and the UK’s FTSE 100 index fell 0.1%.

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Trump’s Tariffs Hit Market Sentiment

Last Friday, global stock markets, including major European indices, received a boost after the U.S. Supreme Court overturned most of the tariffs imposed by President Donald Trump last year, ruling that the emergency law he relied on did not permit the tariffs.

However, over the weekend, Trump responded with a different legal approach, first announcing a 10% global tariff, then raising it to 15%. This tariff could last for five months, during which the government will seek more lasting compromises.

Trade policy appears to be a source of uncertainty that is suppressing market sentiment.

European Central Bank President Christine Lagarde said on CBS’s “Face the Nation” on Sunday: “If it shakes the entire balance that people have already become accustomed to in trade… it will bring chaos.” “Before you get on the train, you want to know the rules of the road. The same applies to trade. The same applies to investment.”

German Ifo Data Expected to Show Confidence Improvement

Confidence in Europe has been rising, driving the broad-based STOXX 600 index to a record high last week, supported by generally positive earnings reports and economic data indicating the region is gradually recovering.

Data released last Friday showed that business activity in the eurozone accelerated this month, surpassing expectations, with manufacturing returning to growth for the first time since October.

Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said: “It may still be early, but with the overall PMI rising into expansion territory, this could be a turning point for the manufacturing sector.”

Germany’s Ifo Business Climate Index will be released later today, with expectations of further improvement in confidence among the eurozone’s leading economies.

Nvidia Earnings to Be This Week’s Focus

This week, Europe will see more important earnings reports, including HSBC, Deutsche Telekom, Evonik, and Schneider Electric, but the most significant release will come from across the Atlantic, with chip giant Nvidia (NASDAQ: NVDA) reporting earnings on Wednesday.

Prior to that, PostNL announced a 43% cut to its annual dividend and warned that free cash flow in 2026 could turn negative again, as the Dutch postal group’s full-year free cash flow shifted from a profit of €12 million a year earlier to a loss of €25 million, despite revenue increasing by 2.2% to €3.32 billion.

Almirall SA’s newly launched eczema biologic Ebglyss saw sales double in its second year on the European market. The Barcelona-based dermatology specialist said this drove the company’s annual revenue to break through €1 billion for the first time.

Additionally, the Financial Times reported Monday morning that Rolls-Royce is urging the UK government to commit taxpayer support for its £3 billion new aircraft engine project, as the company seeks to re-enter the lucrative short-haul market.

Oil Prices Fall Ahead of Nuclear Negotiations

Oil prices fell sharply on Monday, giving back some of last week’s gains, as investors weighed the prospects of a third round of nuclear talks between the U.S. and Iran and new uncertainties stemming from U.S. trade policies.

Brent crude futures declined 1.3% to $70.39 per barrel, while U.S. WTI crude futures fell 1.4% to $65.55 per barrel.

Last week, both contracts surged nearly 6% amid concerns over potential U.S.-Iran conflict and an unexpected drop in U.S. crude inventories.

The two countries are expected to hold their third round of nuclear talks in Geneva on Thursday, raising hopes for a diplomatic resolution and reducing the risk of Middle Eastern oil supply disruptions.

Iran is a key oil producer in OPEC, with the world’s largest proven crude oil reserves.

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