By Ricky S 
European stock markets will move up when they open on Wednesday, 5th May, due to the renewed optimism over the potential lifting of the restrictive tariffs that U.S. President Donald Trump had imposed on the so-called “two North American lumberjacks” and his “not-so-poor neighbor” Mexico.
This optimism stems from the words of the U.S. Commerce Secretary Howard Lutnick, who thought, if he were to guess, then he would dare to assume that Trump will make the first steps in concluding compromise deals with the North American pair as quickly as in a couple of days.
In the United Kingdom, the FTSE 100 is poised to rise to 8,806 points up by 56 points from the previous day, and Germany’s DAX will jump by 416 points to 22,733. Data from IG shows that France’s CAC follows with the expectation of a rise by 146 points to 8,176, and Italy’s FTSE MIB is also estimated to grow by 403 points up to 38,282.
The effervescent mood isn’t strange given the sharp loss, Wall Street sustained for two consecutive days after the introduction of 25% tariffs on goods from Canada and Mexico, and another 10% levy on Chinese imports. While the multifarious effects of these new tariffs were initially kuIled, they, on the other hand, become the added concern of the world about inflation and the increased risks of still unsolved trade wars hilling.
Nevertheless, futures of the U.S. stock market experienced an uptick in the evening after Lutnick’s mention, which shows that the president is likely to present a solution on the tariffs with Canada and Mexico on Wednesday.
In line with this, financial markets have breathed new life this recent week with the news about America’s tendency to favor reconciliation, at least with its North American allies model. Yet some analysts see this as just a “tactical retreat.”
The potential bargain on tariffs is especially critical for European markets considering that the threat of the U.S. trade policy shifting to the European Union has come to loom large over the investors. The European manufacturers and investors were caused to worry as President Trump once suggested the 25% tax on cars and imports from the EU.
The tariff situation has been met with the promise of countermeasures from Canada, Mexico, and China, which are all three countries affected. As a consequence, the volatility of the exchange markets reached the highest level of the Canadian dollar and the Mexican peso involved in the issue. On the contrary, the euro has gained strength against the market difficulties as it was trading at a rate of $1.0663, the highest one reached since November, early on Wednesday.
This strong side of the common currency might also be described as a consequence of the latest events happening in Germany where four political parties who want to create the new government agreed to allocate adequate funds and modify the borrowing regulations. Consequently, the country has become the key driver in the change which is shown in the increased military expenditures and the rectification of the economy.
Actually, experts are of the opinion that the concealment of doubts for the European defense industry on the medal has not a little appreciably trembled the euro. If Germany has a surprisingly sharp increase in the debt brake, the euro could rise, and the news about the defense spending will add the momentum to the recovery in Europe.
As for economic data, the focus will be on the disclosure of several important releases on Wednesday. South Korea and Australia will announce their GDP growth data while the services PMI data report for the February period will outline a clearer picture in different countries such as the UK, Euro zone, and Australia. These macroeconomic indicators are set to unveil some interesting facts about the vitality of global economies amidst the ongoing trade wars.
In the corporate world, the pharmaceutical company Sandoz is expected to report its earnings on Wednesday, which will add an exciting aspect to the interests of the investors. The combination of potential tariff compromises, economic releases of data, and a corporate earnings report, is expected to be the catalyst to the day’s activities.
The recent market volatility also included the other sectors, which resulted in the autos and parts sector having its largest single-day fall since March 2022 with a 3.4% fall. In the financial services and banks, we also noticed that the sector was down by 3.7% and 3.8%, respectively, while the falling oil prices took energy stocks down by 4.2%.
While European markets are getting ready to open on a positive note, investors are still being cautiously optimistic regarding the possibility of the ease of the already existing trade tensions. On the other hand, they still are bearing in mind the broader economic issues, which include inflation worries and the danger of a recession.
Following the upcoming European Central Bank meeting on Thursday, more light will be shed on the economic developments of the Eurozone. Given Morgan Stanley’s prediction of another rate cut in April, shareholders are likely to be watching closely for any signals coming from the ECB in regard to possible future monetary policy decisions.
In the course of the trading day, changes in policy in response to tariffs, as well as the performance of the representative sectors and individual shares, will be watched by market players. The interplay between the geopolitical events, economic data, and company performance will, in all likelihood, continue to influence the market sentiment during the next few days and weeks.