European Equities Slip, STOXX 600 Declines 0.33%

Key moments

DAX and CAC 40 Follow STOXX Down in European Market Opening

European stocks opened lower on Tuesday as investors weighed updated inflation forecasts and ongoing political tensions between US President Donald Trump and Federal Reserve Chair Jerome Powell. The pan-European STOXX 600 fell 0.33% to 504.74, while Germany’s DAX slipped 0.15% to 21,174. French stocks also suffered, with the CAC 40 index dropping 0.28% to 7,265.

Healthcare stocks were among the biggest decliners, with Danish pharmaceutical giant Novo Nordisk dropping 7.58% after a major US competitor, Eli Lilly, reported that its trials for a competing weight-loss drug have shown positive results. Luxury and retail sectors were mixed, with French cosmetics leader L’Oréal gaining over 3% after strong earnings, while high-end fashion brands faced pressure due to concerns over slowing Chinese demand.

Meanwhile, the European Central Bank’s latest survey showed that professional forecasters have reassessed their inflation expectations upward, now anticipating a 2.2% rate for 2025. This marks a slight increase from the earlier projection of 2.1%. This adjustment suggests that price pressures may persist longer than expected, complicating the ECB’s path toward potential rate cuts. As GDP growth projections were trimmed to 0.9% (compared to the previous 1%) for 2025, investors have grown increasingly cautious about the region’s economic resilience.

Market sentiment was further dampened by renewed tensions between President Trump and Fed Chair Powell. Trump’s latest remarks, which saw the president criticizing Powell’s reluctance to cut interest rates, have stoked fears that US central bank policy could be subject to political interference. This uncertainty has contributed to a broader risk-off mood across the globe, with European equities underperforming compared to their US counterparts. In addition, analysts have suggested that Trump’s aggressive stance could prolong market volatility, particularly if the Fed’s independence comes under greater scrutiny.