Stock prices are plummeting at an accelerated pace.
Firing Up European Markets Today
This morning, European markets are up and running with Milan leading the charge. The surge is related to clarifications on the tariff front. After weekend talks in Geneva, the U.S. and China have tentatively agreed on a preliminary deal. crucially, this agreement includes the establishment of a "consultation mechanism" to address trade disputes. Further details will be revealed in a joint statement later today.
Initial optimism about the negotiations was evident from the comments of Donald Trump and Treasury Secretary Scott Bessent. Both praised the "substantial progress" made, with the president even referring to a "complete reset" resulting from friendly yet constructive discussions. Trade representative Jamieson Greer was more forthcoming and hinted, albeit vaguely, at the possibility of an "agreement."
In response to this news, European indices are recovering: Milan, at 9:30 AM, is up by 2.12% while Frankfurt's Dax is up by 1.70% and Paris by 1.33%. Futures on Wall Street, on the other hand, are experiencing a significant surge: the Nasdaq is jumping by 3.6%, and the S&P 500 is increasing by 2.8%.
The preliminary agreement between the U.S. and China potentially hints at a rebound for the luxury sector. Key stocks in this sector are seeing accelerated growth in Milan: Moncler is up almost 6%, Brunello Cucinelli almost 5%. Industrial stocks are also performing well, with Stellantis at the top of the list of gainers: +6.13%. At the bottom of the list, Leonardo is experiencing a dip of -4.47%.
The negotiations also signal the continuation of earnings season at Piazza Affari. Unicredit is under the spotlight today as it has reported its best-ever quarter. The bank has improved its 2025 guidance and suggested a possible upside. After the results, the stock opened with a 2.47% increase and was up by 3.76% by 9:30 AM. Naturally, all eyes are now on the statements of CEO Orcel during the ongoing conference call with analysts.
Attention is also on Media for Europe (formerly Mediaset) following the bid from Czech group PPF for German ProSiebenSat.1. Mfe recently increased its stake in the German company. PPF aims to increase its stake in ProSiebenSat.1 through a partial public takeover offer to bring its participation (currently the second-largest shareholder at 14.94%) up to 29.99% by offering €7 per share in cash. PPF's offer represents a 17% premium over ProSiebenSat.1's Friday closing price and a 21% premium over Mfe's offer price.
Breaking Down the U.S.-China Trade Agreement
- Tariff Reductions: The U.S. will temporarily reduce tariffs on Chinese goods from 145% to 30% for a 90-day period, except for sector-specific tariffs (such as on automobiles, aluminum, and steel) and tariffs related to China's involvement in the fentanyl trade.
- Chinese Tariff Adjustments: China will suspend its initial 34% retaliatory tariff on U.S. goods for the same 90-day period but will retain a 10% tariff during this timeframe.
- Non-Tariff Countermeasures: China has agreed to suspend or remove non-tariff countermeasures against the U.S. taken since April 2, 2025.
- Negotiation Mechanism: A structured process for further negotiations is established, with senior officials from both countries expected to engage in talks within the 90-day window.
- Market Access: The agreement sets a path for future discussions to open market access for American exports.
A Shot in the Arm for European Markets and the Luxury Sector
- Reduced Trade Volatility: The temporary easing of bilateral tariffs may reduce uncertainty in global markets, benefiting European exporters.
- Potential Shifts in Consumer Demand: Lower tariffs on Chinese goods could make Chinese products more competitive in the U.S., possibly shifting some demand away from European products, particularly in sectors like electronics and consumer goods.
- Impact on Luxury Sector: For the luxury sector, which has become increasingly reliant on Chinese consumers, any improvement in US-China relations could be positive. Enhanced trade relations may support Chinese consumer confidence and spending power, potentially boosting demand for European luxury goods, especially if the broader economic climate improves.
- Uncertainty Remains: The agreement is described as a "temporary solution," and experts warn of ongoing uncertainty regarding the final outcome after the 90-day period. The luxury and broader European markets could face renewed volatility if negotiations do not result in a stable, long-term accord.
- Supply Chain Adjustments: European firms may need to reassess their supply chains, especially if the agreement leads to shifts in the global production landscape or changes in tariff structures for key inputs.
- The preliminary U.S.-China agreement could have a positive impact on the luxury sector, as China's consumption power might increase, boosting demand for European luxury goods.
- The average European stock market is performing well in response to the U.S.-China negotiation progress, with Milan, Frankfurt, Paris, and future Wall Street indices showing significant growth.
