European markets faced a decline on Thursday as uncertainty surrounding the global economy persisted. The STOXX 600 index fell 0.4%, though it was still on track to finish the week with a 4.2% gain. The drop came amid cautious sentiment from Federal Reserve Chair Jerome Powell, who warned about potential stagflation risks and stated that the Fed would hold off on any major interest rate changes until more economic data was available. The euro also eased 0.25% to $1.1372 ahead of the European Central Bank’s anticipated policy meeting, where a rate cut is widely expected.
The uncertainty in global markets was further compounded by ongoing trade negotiations between the U.S. and Japan. U.S. President Donald Trump had unexpectedly joined the talks, which were said to have made “big progress,” though specific details remained scarce. Investors were also eyeing the European Central Bank’s stance on the potential effects of U.S. tariffs, as the eurozone faces challenges from trade disruptions and inflation risks. Analysts worry that the ECB might also issue a cautionary outlook about stagflation.
Jerome Powell’s comments about the risks posed by Trump’s tariff policies weighed heavily on market sentiment. Powell highlighted concerns that these policies could push inflation and employment further away from the central bank’s targets. This warning added to existing uncertainty in the markets, with investors remaining hesitant to make bold moves amid fears of further economic instability. Powell’s cautious tone contrasted with optimism from U.S. President Trump about potential trade progress.
In other market developments, technology stocks received a boost from better-than-expected earnings from Taiwan’s TSMC, the world’s largest contract chipmaker. However, warnings from major companies like Nvidia and ASML about the impact of tariffs on their future outlook added to investor anxiety. The dollar remained under pressure, having recently dropped to a three-year low, while gold hit a new record high as investors sought safer assets amidst the global economic uncertainty.
Source: Reuters