ECB Casts Shadows Over Growth as DAX & CAC Take On Losses

Various ECB members highlight increased geopolitical and tariff war risks, while Goldman Sachs cuts its 12-month forecast for the Stoxx600.

• ECB members see greater risk to growth than inflation from trade tariffs
• Also raises concerns over risks of an AI bubble
• Goldman Sachs cuts EuroStoxx600 forecast to 530 from 540

The DAX and the CAC both lost 1%on the day at one point this morning. Concerns are rising for growth prospects as the markets come to terms with the possibility of a trade tariff war.

Luis de Guindos, ECB’s Vice President, and Bundesbank President Nagel stated their concern for economic growth trade tariff could lead to. On the other hand, they were more confident about their inflation outlook.

“The balance of macro-risks has shifted from concerns about high inflation to fears over economic growth,” de Guindos speaking at an event in Frankfurt.

Nagel made similar comments in a speech from Tokyo, where he emphasized that Trump’s trade tariffs may “upend international trade”, but he did not see an impact on inflation.

The head of the ECB’s advisory department, Claudia Buch, also weighed in today. Adding that protectionist policies may hinder Europe’s full growth potential.

“Protectionist tendencies could disrupt the global supply chains that are essential to European industries, with a negative impact on firms’ growth potential, competitiveness and financial resilience,”

De Guindos also raised concerns over the continuous bullish trend of AI stocks, and the spread to the broader market. He believes that a strong market correction is likely as the market is concentrated in a handful of AI stocks.

Reports from the Wall Street Journal yesterday also showed how AI venture funds are experiencing their lowest returns ever.

Last year venture funds invested $60 billion more than they reaped in start-ups. The trend is likely to continue as IPOs are at their slowest pace since 2011.

Goldman’s Cuts EU Stocks Forecast

Today the U.S. investment bank downgraded the EuroStoxx600 index, with a target level of 530 from its previous target of 540.

The index pierced below the level of 500 today for the first time since August. The bank cited concerns over growth in the EU area and recent weak earnings reports.