Market Wrap: A Decisive Day for Iran❓U.S. and European Markets Compete for Investors ⚖️

Geopolitics and Sentiment

• Today’s trading session in Europe marks yet another day of trading “dictated” by the Middle East—markets are torn between hopes for a deal and the risk that Trump’s deadline for Iran will lead to further escalation.

• After the Easter break, the Stoxx 600 is trying to recover, but sentiment remains fragile: investors are mindful that European indices have lost more ground than their U.S. counterparts since the outbreak of the war, and any news from Tehran or Washington could reverse today’s gains in a matter of minutes.

• The market is still dominated by a “price in the worst-case scenario” outlook, but the question is increasingly being raised as to whether higher oil prices will force the ECB to react more aggressively than the Fed, which would further hurt European stocks.

Today's session: the calm before the storm?

• The indices are showing consolidation rather than a panic sell-off: the DE40 is up about 0.5%, the US500 and US100 are each up 0.07–0.08%, and the Italian ITA40 is up more than 0.7%.

• In the FX market, the dollar is giving up some ground following yesterday’s rally—EURUSD is up 0.15%, GBPUSD is up 0.19%, USDPLN is virtually flat, and USDJPY has barely moved.

• Among precious metals, gold stands out: following its recent pullback, it has rebounded by nearly 0.6% to around $4,676 per ounce, while silver remains slightly in the red.

• At the individual company level in Europe, the financial sector is once again shining—BNP surged by over 2%, confirming that banks remain a natural hedge against a scenario of higher inflation and persistently higher interest rates.

European stocks: a "wait-and-see" session

• Investors are acting cautiously but are not panicking. The Stoxx 600 is hovering near the local highs of the past three weeks, while the DAX is trading within a narrow range around 23,400 points.

• The media sector is leading the way (with strong trading in Universal Music following a takeover bid from Pershing Square), along with banks, which are benefiting from rising yields and the prospect of persistently high interest rates.

• The tech sector is clearly lagging behind—ASML is down more than 4% in response to announcements of additional U.S. export restrictions on equipment shipments to China, which fits perfectly with Bloomberg’s narrative of “U.S. AI downgrades” and regulatory pressure on the sector.

Samsung: A Symbol of the New Wave of "AI Winners"

• Samsung is now a textbook example of how AI can transform the fortunes of an entire conglomerate in just a few quarters—the company estimates that its operating profit for the first quarter will reach 57.2 trillion KRW, more than eight times the figure from a year ago and exceeding its total profit for 2025.

• That would be a new record in the company’s history—nearly three times the previous quarterly high—and would far exceed market expectations, which hovered around 40–42 trillion KRW.

• This is primarily driven by the memory segment: according to industry estimates, DRAM prices are expected to rise by more than 50% in the second quarter, and the surging demand for HBM memory and traditional chips for AI data centers is causing a chronic supply shortage.

• Importantly, from a market perspective, Samsung’s guidance shows that the company is genuinely closing the gap with SK Hynix—the first shipments of HBM4 to Nvidia confirm that the company is back in the game in the most advanced memory segment.

• Despite this boom, several potential "setbacks" are already visible on the horizon: first, some analysts fear that the pace of memory price growth is nearing its peak, and recent weeks have seen a slight cooling of spot DRAM prices; second, the war in Iran raises the risk of disruptions in the supply of industrial gases (including helium), which are critical for chip production.

• This does not change the fact that, from the perspective of global capital allocation, Samsung is undergoing an accelerated “re-rating”—with profits rising eightfold and the memory division’s estimated operating margin hovering around 70–80%, the company is becoming one of the biggest beneficiaries of the current wave of investment in AI infrastructure. 

Europe is losing its hard-won advantage

• Since the start of the Iran-U.S. conflict, the Euro Stoxx 50 has already fallen by more than 7%, while the S&P 500 has lost just under 4%—Europe’s lead over the U.S., painstakingly built up over the past two years, is beginning to crumble.

• At the same time, what was supposed to be the European market’s main advantage—its valuation discount relative to the U.S.—is disappearing. The S&P 500 has undergone its own sharp “de-rating”—the forward P/E has fallen by about 15% since October amid concerns about AI, excessive spending, and risks in the private credit sector, while the Stoxx 600’s ratio has remained virtually unchanged.

• Earnings growth is also becoming a problem for Europe. Until recently, the EPS consensus was rising on the back of confidence in fiscal support and imminent rate cuts, but today those assumptions are fading: the economy is much more sensitive to oil prices, and the bond market has begun to price in nearly three ECB rate hikes this year.

Earnings revisions: the U.S. holds the advantage

• Citi’s earnings revision index shows that, since the start of the year, momentum has clearly shifted in Wall Street’s favor—in the U.S., the number of upward revisions has consistently outpaced downward revisions, while downward revisions continue to dominate in Europe.

• Bloomberg’s model indicates that, given the current energy crisis, European companies are expected to generate only about a 5% increase in EPS for the Stoxx 600 in 2026, compared with 25.5% four years ago and a consensus forecast that remains optimistic at around 10%.

• Strategists point out that this time around, companies have far fewer tools at their disposal to defend their margins than they did in 2022: global nominal growth is half as high, pent-up demand has faded, the labor market is softening, and the tax authorities are no longer as supportive of businesses as they once were.

Market Valuations: The U.S. premium has narrowed, but Europe is no longer a clear-cut opportunity

• The U.S. valuation premium has narrowed significantly—the U.S. index has returned closer to its historical average, while Europe has moved higher, riding the rally that began in the fall of 2025.

• In other words, the argument that “I’m buying into Europe because it’s cheap” is losing its appeal today: given the risk of an oil-related slowdown and a more hawkish ECB, that risk premium no longer looks attractive.

• At the same time, the projected EPS for the Stoxx 600 continues to climb—if the conflict in Iran keeps oil prices above $100 for several months, downward revisions may only just be beginning, which would worsen the risk-return ratio for European stocks.