European Stocks Fall as High Inflation and Corporate Earnings Come into Focus

Author: Peter Nurse
Published: July 16, 2025, 09:07

Introduction

European stock markets declined on Wednesday as investors worried about persistently high inflation while digesting more corporate earnings amid an intensifying earnings season.

At 09:05, Germany’s DAX index was down 0.4%, France’s CAC 40 fell 0.3%, and the UK’s FTSE 100 slipped 0.1%.

Trade Tensions Weigh on Sentiment

Market sentiment in Europe soured this week after U.S. President Donald Trump announced the introduction of 30% tariffs on imports from the European Union, effective in early August.

European ministers remain confident they can negotiate with Trump before the deadline and secure an agreement that would largely preserve the €1.7 trillion bilateral trade relationship, but uncertainty dominates.

This tension has darkened the outlook for European corporate health. According to LSEG I/B/E/S data, Q2 corporate earnings are now expected to decline by an average of 0.7% year-over-year, worse than last week's forecast of a 0.2%drop.

Corporate Results Continue to Roll In

ASML reported better-than-expected Q2 orders but warned it might miss its 2026 growth target. As the world’s largest supplier of semiconductor manufacturing equipment, its guidance carries significant weight for the tech sector.

Richemont, the Swiss luxury giant behind Cartier and Van Cleef & Arpels, posted stronger-than-expected Q1 revenue, supported by sustained strength in its Jewellery Maisons. However, margin pressures remain a concern.

Handelsbanken reported a 12% decline in Q2 operating profit compared to the previous quarter, citing lower net interest income and trading losses.

The U.S. earnings season has also kicked off. Results from major banks JPMorgan Chase and Citigroup on Tuesday drew a mixed reaction from markets.

Later in the day, investors awaited additional results from Goldman Sachs, Morgan Stanley, and Bank of America, while Johnson & Johnson was set to provide more insight into consumer trends.

Inflation Remains a Key Concern

High inflation continues to worry investors.

U.S. consumer price data came in higher than expected on Tuesday.

UK annual consumer price inflation also unexpectedly rose to 3.6% in June, its highest level in over a year, according to data released Wednesday.

This puts a spotlight on U.S. producer price inflation data due later Wednesday, as investors seek clues about when the Federal Reserve might move forward with its next interest rate cut.

Oil Prices Rebound on OPEC Demand Outlook

Oil prices rose on Wednesday, bouncing back after two days of losses.

The rebound was supported by major producers maintaining an optimistic view of global demand.

At 09:05:

Brent crude futures were up 0.3% at $68.89 per barrel.

U.S. West Texas Intermediate (WTI) futures gained 0.4% to $66.80 per barrel.

The rise reversed earlier declines as markets shrugged off concerns about potential supply disruptions after President Trump threatened tariffs on Russian oil imports.

OPEC maintained its demand forecasts for 2025 and 2026, expressing optimism that global trade tensions would ease in the coming months.

The group also stated the global economy could see stronger-than-expected growth in the second half of the year despite ongoing trade conflicts.

Conclusion

European stocks faced pressure from escalating trade tensions, stubbornly high inflation, and mixed corporate earnings results.

Investors remain focused on central bank policy signals and the progression of the Q2 earnings season as key drivers of market direction in the coming weeks.