European stock markets opened with modest gains on Monday, reflecting cautious optimism as global attention turned to the inauguration of Donald Trump for his second term as US president. Investors braced for potential market volatility, with thin trading activity expected amid the closure of US markets for Martin Luther King Jr. Day.
Markets edged higher across Europe, with Germany’s DAX, France’s CAC 40, and the UK’s FTSE 100 all posting minor gains of 0.1% by mid-morning. This restrained movement signals the anticipation surrounding Trump’s planned executive orders and his stance on trade, energy, and regulation.
Trump’s inauguration is expected to dominate market sentiment. Having campaigned on promises of deregulation, lower taxes, and an aggressive approach to energy policy, his first actions in office are likely to set the tone for his second term. Reports suggest that he may declare a national emergency to secure new powers, adding a layer of uncertainty to global markets. Investors are particularly cautious about the potential for heightened trade tensions, including the possibility of increased tariffs targeting China and the European Union.
Elsewhere in Europe, attention also turned to the World Economic Forum in Davos, where political and business leaders convene this week. Key attendees include European Central Bank President Christine Lagarde and UK Chancellor Rachel Reeves, while Trump is scheduled to address the forum via video link. Economic growth, trade, and the energy transition are likely to dominate discussions.
Germany reported softer-than-expected producer price inflation in December, with prices rising by 0.8% year-on-year, below the anticipated 1.1%. This muted inflationary pressure follows the European Central Bank’s aggressive rate-cutting measures, which have helped bring eurozone inflation closer to the ECB’s 2% target. Meanwhile, China’s central bank kept its benchmark interest rates steady, signalling a wait-and-see approach amid ongoing uncertainty over US trade policies.
Corporate news offered limited excitement for European investors, though Swiss company Belimo Holding saw its shares rise by 2.4% after reporting stronger-than-expected full-year revenue. Across the Atlantic, US earnings season is underway, with major banks benefiting from robust deal-making and equity market performance.
Oil prices eased slightly as traders adopted a cautious stance ahead of the inauguration. Brent crude slipped 0.5% to $80.36 per barrel, while US West Texas Intermediate fell by the same margin to $77.01. Speculation about Trump’s potential policy shifts, including a possible deal with Russia to ease sanctions in exchange for resolving the Ukraine conflict, added complexity to the outlook. Despite Monday’s dip, oil prices remain up 10% this month due to concerns over tighter supply from Russia amid Western sanctions.
As Europe’s markets adjust to a day of subdued trading, investors remain on edge about the implications of Trump’s re-emergence as a global economic force. With key policy decisions looming, all eyes will be on Washington and Davos for signals about the next phase of international economic and geopolitical strategy.
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