Investor confidence in European stocks and the euro is wavering after a strong first quarter, as concerns grow that expectations for a public spending boost have outpaced the region’s sluggish economic reality.
Adding to the uncertainty, U.S. President Donald Trump is set to announce reciprocal trade tariffs on April 2, further fueling fears of a potential trade war.
Leading asset managers, including Amundi—Europe’s largest—have either scaled back their bets on the euro or trimmed their bullish positions in European equities. Many believe the so-called “Europhoria” trade, which drove German stocks to their best quarter since 2022 and lifted the euro to a five-month high in March, has already priced in most foreseeable economic stimulus gains.
“If the Trump administration escalates trade tensions, it will be bearish for European equities,” said Benjamin Melman, CIO at Edmond de Rothschild Asset Management. He added that he does not anticipate significant further gains for European stocks at this point.
Global markets took a hit on Thursday after Trump announced a 25% tariff on car imports, wiping billions of euros off German automakers’ shares and causing European equities to drop as much as 2%.
Luca Paolini, chief strategist at Pictet Asset Management, warned that additional tariff-related shocks could have a harsher impact on European assets—especially those that had surged on stimulus expectations—compared to U.S. markets, which have already been weighed down by Washington’s erratic trade policies.
