European stocks have outperformed the US in the month since President Donald Trump’s inauguration, while hopes that the region can avoid a trade war have also increased.
According to the Financial Times (FT), the benchmark Stoxx Europe 600 index has gained 5.6% since January 17, the last trading day before Trump re-entered the White House, while on Wall Street, the S&P 500 rose 2.5%, and the tech-heavy Nasdaq Composite rose 2.2%.
Analysts said that Trump’s decision not to immediately impose tariffs on the EU, as well as the possibility of the start of peace talks in Ukraine, were effective in the unexpectedly strong performance of European indices.
The EU was set to be one of the main targets of Trump’s “America First” policies after the US President promised to impose all-out tariffs on the EU, but none of these tariffs have yet come into effect.
Andrew Pease, chief investment strategist at Russell Investments, said: “For Europe, the bark of the trade war has so far been worse than the bite. But the other stories are the upward trend in bank lending over the past year and the European Central Bank cutting interest rates.”
European stocks are off to their best start to a year since the late 1980s and have posted their strongest performance in almost a decade compared with the US, Bank of America analysts said in a note on Wednesday.
Europe’s gains came despite signs of recession in the continent’s major economies and concerns about the region’s long-term security with the US threatening to withdraw its military support.
Sectors such as finance, defense, and luxury stocks rose due to the absence of first-day tariffs.
Europe’s largest ammunition manufacturer Rheinmetall rose 34% last month, while luxury manufacturer Richemont rose 11%.
On the other hand, Hong Kong has been the best-performing main index since Trump took office, and the Hang Seng index has risen 15% since January 20, led by a rally in Chinese technology stocks listed in the region after the DeepSeek shock.
