Stock Market is Rising Amid Tariff Concerns

European markets opened higher on Tuesday, buoyed by tentative optimism around U.S. trade policy. The pan-European Stoxx 600 was up 0.5% in early trading, with most sectors in positive territory. The auto industry led gains, climbing 2.3%, after President Donald Trump hinted at support for carmakers facing 25% tariffs. However, luxury goods giant LVMH fell 8% following disappointing Q1 sales results.

Investor sentiment improved following news that certain tech products — including smartphones, computers, and semiconductors — would be exempt from upcoming U.S. tariffs. Trump indicated plans to reveal tariff rates on imported semiconductors within a week. This fueled gains on Wall Street and lifted most Asia-Pacific markets overnight. Still, uncertainty lingers over the duration of these exemptions and the broader scope of Trump’s “reciprocal tariff” strategy. The EU has paused its retaliatory measures for 90 days to pursue negotiations.

U.S. futures also pointed higher on Tuesday after back-to-back gains for the S&P 500. Dow futures rose 126 points (0.31%), while S&P 500 and Nasdaq 100 futures gained 0.38% and 0.48%, respectively. Monday’s session saw major indexes close in the green, driven by tech sector strength. Despite the temporary relief, officials including Trump and Commerce Secretary Howard Lutnick signaled that tariff exemptions may be short-lived.

This week marks a critical stretch for first-quarter earnings, with reports expected from major firms like Bank of America, Citigroup, Johnson & Johnson, and PNC Financial. According to Brenda Vingiello of Sand Hill Global Advisors, however, Q1 results may not provide much clarity on how tariffs will impact corporate outlooks. “We’re just going to hear a lot of uncertainty,” she said, suggesting that while Q1 likely performed well, guidance will be key.

In the UK, investors digested labor market data showing unemployment steady at 4.4% in the three months to February. Wage growth remained robust, with earnings excluding bonuses up 5.9% year-over-year. However, vacancies declined for the 33rd consecutive quarter, slipping below pre-pandemic levels. Analysts suggested that concerns over April’s employer tax increases may be prompting firms to slow hiring, although wage growth continues to outpace inflation.

Corporate updates added further texture to Tuesday’s trading. Discount retailer B&M reported that operating profits would exceed the midpoint of its guidance, thanks to productivity improvements and stronger Q4 sales. Transport operator FirstGroup also exceeded expectations, driven by robust results from First Rail and steady performance from First Bus, aided by yield gains and strategic acquisitions. Despite a £50m share buyback, net debt came in below forecast.

Meanwhile, global fund managers have sharply reduced their exposure to U.S. equities, according to Bank of America’s latest survey. A net 36% are underweight U.S. stocks, the steepest shift in nearly two years. Concerns over a trade war triggering a global recession topped investor risks, while sentiment toward the U.S. dollar also deteriorated. Nearly three-quarters of respondents believe the theme of “U.S. exceptionalism” has peaked, with many rotating into gold — now considered the most crowded trade, overtaking U.S. tech for the first time in two years.