European stocks edge higher; caution after tariffs threat

Investing.com – European stock markets edged higher Wednesday, but gains were limited amid caution about the economic outlook as the new Trump administration maintained the threat of trade tariffs.

At 03:05 ET (08:05 GMT), the in Germany climbed 0.6%, the in France gained 0.1% and the in the UK surged 0.2%.

Trade war threats weigh

Donald Trump was inaugurated as the next US president on Monday, returning to the White House after a gap of four years, and he has repeated his threat to impose tariffs on EU goods entering the States.

He also said his administration was discussing imposing an additional 10% tariff on goods imported from China, starting in February.

Europe will respond to any US tariffs in a proportionate way, the European Union’s commissioner for the economy, Valdis Dombrovskis said Wednesday.

“If there is a need to defend our economic interests we will respond in a proportionate way,” Dombrovskis said in an interview with CNBC at the World Economic Forum in Davos, Switzerland. 

Lagarde due at Davos

There are no major data releases in Europe Wednesday, and the focus is likely to remain on Davos, with European Central Bank President heading up a series of appearances by ECB officials speaking about interest rates.

The central bank is widely expected to lower its policy interest rate by 25 basis points next week, the first cut of what is likely to be at least four this year as the region suffers from growth headwinds.

ECB policymaker Klaas Knot backed the idea of near term cuts in an interview earlier Wednesday.

“I’m pretty comfortable with the market expectations for the upcoming two meetings and farther than that I find it’s too early to comment,” the Dutch governor said on Bloomberg TV.

EasyJet cuts operating loss  

In corporate news, easyJet (LON:) stock rose around 1% after the low-cost carrier reported a smaller operating loss in its first quarter on easing fuel costs and strong passenger demand for travel and its holiday packages.

Chocolate maker and cocoa processor Barry Callebaut (SIX:) reported a lower sales volume than expected for its first quarter, hit by delayed orders amidst record high cocoa prices.

The tech sector will also be in the spotlight following the announcement that OpenAI, SoftBank (TYO:) and Oracle (NYSE:) will form a venture to invest $500 billion in AI infrastructure across the US, and after streaming giant Netflix (NASDAQ:) reported a record gain in subscribers last quarter.

Crude retreats on plans to lift US output

Oil prices slipped lower Wednesday, adding to the previous session’s losses on the back of President Trump’s declaration of a national emergency to ramp up energy production. 

By 03:05 ET, the US crude futures (WTI) dropped 0.5% to $75.43 a barrel, while the contract fell 0.4% to $78.97 a barrel.

The benchmarks retreated on Tuesday after Trump laid out his plan to maximise oil and gas production, including by declaring a national energy emergency to help the rolling back environmental protections, and withdrawing the US from the Paris climate pact.