Analysis-European stocks' stellar start to 2025 snuffed out as tariffs cloud Q1 earnings

Lucy Raitano

Mon, Apr 7, 2025, 3:19 AM 4 min read

By Lucy Raitano

LONDON (Reuters) - European equities' awesome commencement to 2025 has been obliterated successful 3 sessions of dense selling, portion executives tot up the imaginable interaction of U.S. tariffs connected proviso chains, perchance forcing them to ditch erstwhile fiscal predictions.

U.S. President Donald Trump's tariffs are much sweeping than galore marketplace players feared, sending planetary stocks plummeting arsenic investors fly to safe-haven assets amid recession worries.

Companies successful Europe's STOXX 600 index, which had its champion first-quarter comparative to the U.S. S&P 500 successful a decade, had been expected to study unbroken quarterly net maturation done 2025 and into 2026, according to LSEG data.

On Friday, the STOXX 600's year-to-date show turned negative. And arsenic of 1000 GMT connected Monday, it is down 12% since the April 2 adjacent - conscionable earlier Trump's tariff bombshell.

As of past Tuesday, LSEG estimates already showed a 1.5% driblet successful STOXX 600 institution net for the archetypal 4th versus the aforesaid play past year.

"The higher than expected tariff rates ... were not factored into galore investors' oregon companies' calculations," said Magesh Kumar Chandrasekaran, equity strategist astatine Barclays, adding that if this concern persists it should effect successful little growth, and yet little revenues and little profits for companies.

Some sectors are harder deed than others, raising the imaginable of nett warnings, respective analysts said, but caller guidance mightiness beryllium tricky to calculate.

"The question is volition determination beryllium capable clip for them to really get those numbers successful in time? Because we don't cognize what the retaliation measures are going to beryllium from immoderate of the European partners ... oregon adjacent from different countries, successful that benignant of script nonstop numbers mightiness beryllium lacking successful immoderate cases," said Chandrasekaran.

On Friday, China announced further tariffs of 34% connected U.S. goods.

AUTOMAKERS, SPORTSWEAR, LUXURY

Pal Skirta, equity probe expert astatine Bankhaus Metzler, said higher tariffs would erode nett margins for automakers, adjacent if they negociate to walk connected immoderate costs to customers. This wasn't reflected successful 2025 fiscal forecasts, helium said.

In a probe enactment connected the luxury and sporting goods sectors, JPMorgan highlighted each the sporting goods companies it covers, arsenic good arsenic Danish jeweller Pandora and French eyewear shaper EssilorLuxottica arsenic apt hard deed by tariffs.

"For these companies, our initial, and rough, mathematics would suggest worldly double-digit antagonistic impacts astatine EBIT level," it wrote, referring to net earlier involvement and tax.