Authors: Pranav Kashyap and Nikhil Sharma
(Reuters) – European stocks closed unchanged on Monday, having previously hit a three-month high on expectations that Donald Trump will not escalate tariffs on U.S. trading partners immediately after his inauguration as president.
The pan-European stock exchange closed unchanged at 523.87 points, after rising more than 2% over the past week.
The automotive sector, which is particularly sensitive to tariff news, rose 1.1%.
Donald Trump will issue a lengthy trade memo on Monday instructing federal agencies to assess U.S. trade relations with China, Canada and Mexico rather than operate his first day in office to immediately impose tariffs, a modern Trump administration official said.
In response, the US dollar lost 1% and the euro gained 1.2%. [FRX/]
“There is a feeling that this will be a more measured approach from Trump and it will be music to the markets. This is exactly what we wanted to hear after months of worrying about how aggressively he might use trade tariffs,” said Fiona Cincotta, Senior Market Analyst, City Index.
The gains were short-lived as caution was introduced when Trump took the oath of office at 12:00 EST (17:00 GMT).
European stocks are unsettled by fears that Trump’s protectionist policies could spark inflation in the United States and Europe.
“There is still an element of uncertainty,” Cincotta added.
Germany is particularly vulnerable to any tariffs. German Finance Minister Joerg Kukies said Berlin would take a wait-and-see approach to the actions of the modern US president.
The German stock index rose by 0.4%.
The euro zone banking index rose by 1.2%, the most of any sector, followed by the primary raw materials sector with a 1.2% gain.
Utilities fell 1.1%, the most of any sector.
Among other standout results, Nemetschek rose 10.4% after the German software maker announced its full-year results.
Siemens (ETR:) Energy fell 3.4%, with investors pointing to UBS downgrading its recommendation to “sell”.
On a macro scale, German producer prices rose less than expected in December, increasing by 0.8% on an annual basis.
European Central Bank policymaker Robert Holzmann said the central bank could damage its credibility if it cuts interest rates when inflation rises faster than expected, even temporarily.
The ECB is widely expected to cut interest rates by a quarter of a point at its next monetary policy meeting on January 30.
The annual meeting of global political, business and financial leaders at the World Economic Forum (WEF) in the Swiss city of Davos is another eagerly watched event this week.
American stock exchanges were closed for Martin Luther King Day, which resulted in lower trading volumes than usual.