📉DE40 Sheds Nearly 1% Amid Trade Uncertainty

European Indices Retreat on Escalating Tariff Concerns

European equity markets, which started the year with a robust outperformance versus the U.S., have entered a phase of heightened volatility. After an impressive first-half surge—outpacing U.S. equities thanks to a cyclical recovery and renewed investor confidence—April brought a decisive turn. The announcement and subsequent suspension of reciprocal tariffs marked a shift, with U.S. markets staging a much stronger rebound and American corporate earnings forecasts improving, while European profit expectations deteriorated.

European investors are now facing the looming threat of steeper tariffs. While a universal tariff rate of 10% was initially anticipated, President Trump has floated figures as high as 30%, although consensus estimates point to a range of 15–20%. Even at these levels, the impact threatens to further constrain growth prospects for European exporters, particularly in industries exposed to U.S. demand.

Wave of Profit Warnings Across Europe

Rising tariff anxiety is reflected in a mounting string of corporate warnings:

• ASML has tempered its sales guidance in the face of uncertainty.

• BASF, the German chemical major, reported a sharp fall in profits and downgraded its outlook, highlighting weaker operating profit and lower sales, largely due to U.S. tariff headwinds and global demand softness.

• Stellantis unexpectedly posted a $2.7 billion net loss for the first half of the year, primarily due to U.S. tariffs, restructuring, and slumping shipments. The company’s North American volumes fell markedly, underlining the tangible cost of trade restrictions.

Similar warnings of compressed earnings or mounting losses have emanated from Covestro, Solvay, Ericsson, Volvo, and Renault. Notably, Swedish automaker Volvo is scaling back North American production capacity as demand wanes under the weight of new tariffs.

Tonight, German technology giant SAP—a major driver of DAX performance—releases quarterly results. In its most recent update, SAP reported growth in its cloud business and an increase in total revenue, though management remains cautious in light of the global trade and economic environment.

Lowered Earnings Expectations Since Q2

Source: Bloomberg Finance LP

Expectations for companies EPS growth vulnerable to tariffs have been steadily downgraded since April, the beginning of the second quarter. The contrast with earlier optimism is driven by ongoing economic uncertainty and tariff risks.

Source: Bloomberg Finance LP

DE40 Under Pressure: Technical Outlook

The German DE40 index (DAX 40) is down nearly 1% in today’s session. A key support level lies at 24,000 points; a decisive break below could accelerate the sell-off toward 23,500 points, which coincides with historical highs from March and represents a retracement of the most recent rally that followed the post-tariff sell-off in April.