European stock markets extended their upward trajectory as US President Donald Trump made a compelling case for lower global interest rates and banking deregulation at the World Economic Forum in Davos. His remarks energised financial markets, driving record-breaking gains across major indices and sparking a rally in banking stocks. While Trump’s stance on oil prices weighed on energy shares, his calls for bolstered US investment highlighted his administration’s focus on economic growth and strategic industry expansion.
The Euro Stoxx 600 climbed 0.46% to €530.50, marking its seventh consecutive day of gains and reaching a fresh all-time high. Germany’s DAX rose 0.74%, achieving its eighth straight session of record-breaking performance. Similarly, France’s CAC 40 gained 0.7%, its highest level since June 2023, while the UK’s FTSE 100 ticked up 0.23%, also closing at a historic peak.
The banking sector spearheaded the rally, with the Euro Stoxx Banking Index (SX7P) surging 1.83%. Leading European financial stocks posted strong gains, including HSBC reaching its highest valuation since 2000, UBS hitting a 16-year peak, and major players such as UniCredit and Banco Santander advancing by over 2%. Trump’s focus on deregulation and reduced capital requirements is expected to boost returns to shareholders through dividends and buybacks, fostering a more investment-friendly banking environment.
Trump’s Davos appearance also sparked broader conversations around global trade dynamics and industry regulation. His critique of European regulators for imposing strict controls on US tech firms resonated with markets, as did his commitment to easing restrictions on US banks. Notably, he urged financial institutions like Bank of America and JPMorgan Chase to align with his administration’s priorities, particularly in addressing politically sensitive accounts.
Meanwhile, energy stocks bore the brunt of Trump’s criticism of high oil prices, as he called on OPEC and Saudi Arabia to lower costs. This weighed heavily on major producers like Shell, BP, and TotalEnergies, whose shares declined by 0.48%, 0.59%, and 0.43%, respectively. Brent and WTI crude futures fell to two-week lows, extending their losing streak as markets adjusted to expectations of potential US policy changes. Trump’s comments also underscored the geopolitical stakes, linking oil price reductions to a swift resolution of the Russia-Ukraine conflict.
The technology sector experienced mixed fortunes, as earlier enthusiasm over artificial intelligence investments waned. Although SAP maintained its record-high valuation, Dutch chip manufacturer ASML tumbled 4.4% amid fears of tighter US export restrictions on AI-related technologies to China. Speculation about the Trump administration imposing stricter controls on chip exports dampened sentiment, even as European tech firms benefited earlier in the week from Trump’s announcement of a €480 billion AI infrastructure initiative.
As European markets continue to navigate these shifts, investors are eyeing the implications of Trump’s policies for banking, energy, and technology. His firm stance on deregulation and lower costs, coupled with his administration’s ambition to lead in artificial intelligence and energy production, signals significant opportunities and challenges ahead for global markets.
JPMorgan European Discovery Trust plc (LON:JEDT) is an investment trust company. The Investment Trust JEDT objective is to achieve capital growth from a portfolio of quoted smaller companies in Europe, excluding the United Kingdom.
