European stocks have outperformed their US counterparts since Trump’s inauguration amid expectations that a worst-case scenario trade war will be avoided, the Financial Times (FT) reports. The Stoxx Europe 600 index rose by 5.2% since 17 January, while the S&P 500 advanced by 2.5% and Nasdaq rose 1.7%. This marks the strongest start to a year for European stocks since the late 1980s and their best performance against the US in about a decade, FT reports, citing Bank of America analysts.

Behind the trend: Analysts attribute this development to Trump’s decision to hold off on imposing tariffs on the EU, along with the potential for peace talks in Ukraine. The European stock rally has also been supported by increased bank lending and lower interest rates from the European Central Bank, Chief Investment Strategist at Russell Investments Andrew Pease said. Other reasons include fund managers increasing their allocations to European stocks since the beginning of 2025.

The biggest gainers: Sectors such as finance, defense, and luxury goods have posted notable gains. Defense company Rheinmetall surged 28%, while luxury brand Richemont climbed 10% over the past month.

Some are now overweight on European stocks, including analysts at UBS, who upgraded their outlook on European stocks to overweight, citing potential lower energy prices if the Ukraine conflict ends, expansionary fiscal policy, and stronger corporate earnings.

But is it sustainable? Some analysts question whether the rally will last, as US tariffs may be delayed rather than permanently scrapped. Trump has signaled that European imports including cars, pharma, and chips could face 25% tariffs, following similar charges on Canadian, Mexican, and Chinese goods. Meanwhile, UBS analysts warn that European outperformance has historically been short-lived, urging investors to remain cautious.

Also seeing big gains so far this year: Hong Kong’s Hang Seng index has been the best-performing major market since 20 January, rising 15%. The surge was driven by a rally in Chinese technology stocks following the introduction of the AI platform DeepSeek. Elsewhere, China’s CSI 300 gained 3%, Japan’s Topix rose 2%, and India’s Nifty 50 declined 1% during the same period.

MARKETS THIS MORNING-

Asian markets are mostly in the red after inflation data from Japan showed its headline rate climbing to its highest level in two years. Japan’s Nikkei slipped 0.4% at market open, while South Korea’s Kospi is also 0.1% down. Hong Kong’s Hang Seng is the outlier, rising a notable 2.27% at open. Meanwhile, Wall Street futures point to a potentially weak open after major indices slid yesterday on the back of a lackluster earnings forecast from Walmart.

ADX

9,620

+0.3% (YTD: +2.1%)

DFM

5,380

-0.2% (YTD: +4.3%)

Nasdaq Dubai UAE20

4,440

+0.3% (YTD: +6.6%)

USD : AED CBUAE

Buy 3.67

Sell 3.67

EIBOR

4.1% o/n

4.4% 1 yr

TASI

12,388

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EGX30

30,915

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S&P 500

6,118

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FTSE 100

8,663

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Euro Stoxx 50

5,461

0.0% (YTD: +11.5%)

Brent crude

USD 76.48

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Natural gas (Nymex)

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Gold

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BTC

USD 98,238

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THE CLOSING BELL-

The ADX rose 0.3% yesterday on turnover of AED 1.3 bn. The index is up 2.1% YTD.

In the green: Hayah Ins. Company (+6.8%), Bank of Sharjah (+4.9%) and Fujairah Cement Industries (+3.9%).

In the red: National Bank of Fujairah (-10.0%), Oman & Emirates Investment Holding (-9.3%) and Abu Dhabi National Insurance Company (-4.0%).

Over on the DFM, the index closed down 0.2% on turnover of AED 482 mn. Meanwhile, Nasdaq Dubai rose 0.3%.

CORPORATE ACTIONS-

Property developer Deyaar Development’s board of directors has recommended a 5% dividend distribution for the second consecutive year, according to a press release (pdf). The proposed dividend will be submitted for approval at the company’s upcoming general assembly.

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