European indices opened lower and showed some mixed results. The Eurostoxx decreased by 0.7%, Germany’s DAX fell by 0.9%, France’s CAC 40 dropped by 0.6%, the UK’s FTSE declined by 0.2%, Spain’s IBEX went down by 0.4%, and Italy’s FTSE MIB decreased by 0.4%. Volkswagen reported a significant drop in profits for Q2 and lowered its full-year forecasts due to tariff impacts. LVMH also had weaker quarterly sales, negatively affecting French stocks. These shifts follow a decline in the Dow as Wall Street turns its attention to tech shares.

Stability In US Futures

US futures, in contrast, remained steadier, rising by about 0.1%. European stocks are especially influenced by the pending US-EU trade deal, which is not yet finalized as the weekend approaches. The overall drop in European indices signals increasing investor anxiety. This fear is reflected in volatility measures like Germany’s VDAX-NEW index, which has risen over 15% in the last month to above 17. Thus, we believe it is wise to prepare for more market fluctuations. Low’s comments about the German automaker’s issues highlight a broader weakness in the sector, which is highly sensitive to trade policies. Recent data from the European Automobile Manufacturers’ Association shows a 2.6% drop in EU car registrations over the last month, reinforcing this concern. We are considering buying put options on auto-focused ETFs to profit from potential further declines due to the mentioned tariff situation.

Weakness In French Luxury Sector

The reported weakness in the French luxury giant is another important signal, as this sector often reflects global consumer confidence. Recent analyst reports raise concerns about declining demand from Chinese consumers, who represent about 20% of the European luxury market, leading us to be cautious. This scenario makes protective puts on major consumer discretionary stocks an appealing hedging strategy. Given the uncertainty about the US-EU trade deal, we expect continued market volatility. Past trade disputes, like those in 2018 with the former US president, caused the Euro Stoxx 50 Volatility Index (VSTOXX) to rise above 20. We are considering long positions in VSTOXX futures or call options as a hedge against potential breakdowns in negotiations. Create your live VT Markets account and start trading now.

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