European Stocks Stabilize as Dollar Weakens Further Amid Trade Truce and Inflation Data

European stock markets remained steady on May 14, 2025, following a significant rally driven by easing global trade tensions. The STOXX 600 index was marginally down by less than 0.2%, taking a breather after a 17% increase since early April. The rally was fueled by optimism surrounding the U.S.-China tariff pause, which has improved investor sentiment and risk appetite globally. However, with trade issues still unresolved, the market is cautious, awaiting further developments in international negotiations.

In Asia, stocks showed positive movements, particularly in Hong Kong, where the Hang Seng index surged by 2%, driven by strong performance from Chinese tech giant JD.com. However, Japan’s Nikkei 225 slipped slightly, and U.S. futures pointed to a flat start. Despite the cautious tone, overall market sentiment was positive, with some relief stemming from softer-than-expected U.S. consumer inflation data, which lowered concerns about aggressive Federal Reserve rate hikes.

The softer inflation numbers have put the dollar under further pressure, marking a continuation of its recent slide. The U.S. dollar weakened by 0.7% against the yen and 0.4% against the euro. A key factor contributing to the dollar’s decline is the uncertainty surrounding U.S. trade policy, particularly with President Trump’s pending deals with China, India, Japan, and South Korea. Global asset managers have reacted by significantly reducing their holdings of U.S. assets, reflecting concerns over the dollar’s stability.

Despite the ongoing trade uncertainties, including the looming 90-day deadline for the U.S.-China trade agreement, the Federal Reserve has indicated that it is in no rush to cut interest rates. Fed officials are waiting to assess the broader economic impact of tariffs, signaling caution in monetary policy. Markets will look to further data, including U.S. retail sales figures and any updates from upcoming negotiations between Ukraine and Russia, which may affect investor confidence in global stability.

In commodities, U.S. crude oil prices dipped slightly, but held near a two-week high, while gold prices softened due to the reduced safe-haven demand amid the improved trade outlook. Overall, the global market environment remains in a state of flux, with traders balancing the positive impacts of reduced tariff tensions against the lingering risks of economic uncertainty.

Source: Reuters