US stock rally set to stall, European index to outperform in 2025

by Andre Janse van Vuuren

US stock futures pulled back on Tuesday as investors question whether the rally has outpaced fundamentals, with risks from trade tensions and sticky inflation still in play.

S&P 500 contracts retreated 0.2% after the US benchmark closed Monday on the brink of a bull market, following six consecutive days of gains. By contrast, equity gauges in Europe and Asia advanced. The dollar’s weakness continued, dropping 0.1%. Gold fell.

Stocks have rallied in recent weeks amid optimism that tariff disputes are waning since President Donald Trump announced century-high levies April 2. Still, two Federal Reserve officials warned on Monday that they would adopt a wait-and-see approach to gain a clearer view of the economic outlook before lowering interest rates.

Treasuries steadied after whipsawing on Monday with the downgrading of US debt by Moody’s Ratings. Japanese notes slumped after a government bond auction received the lowest demand since 2012, pointing to increasing concerns about investor support as the Bank of Japan dials back its huge debt holdings.

Some Wall Street strategists are betting European stocks will enjoy their best performance relative to the US in at least two decades as the region’s economic outlook improves.

The Stoxx Europe 600 Index is expected to end the year around 554 points, according to the average of 20 strategists polled by Bloomberg. That implies a gain of about 1% from Friday’s close.

“If we have already moved past peak earnings uncertainty, this could set the stage for additional upside and potential multiple re-rating, especially among more beaten-up cyclical sectors,” Citigroup strategist Beata Manthey said of European stocks.

Some of the main moves in markets:

Stocks

• The Stoxx Europe 600 rose 0.1% as of 8:22 a.m. London time
• S&P 500 futures fell 0.2%
• Nasdaq 100 futures fell 0.3%
• Futures on the Dow Jones Industrial Average fell 0.2%
• The MSCI Asia Pacific Index rose 0.4%
• The MSCI Emerging Markets Index rose 0.3%

Currencies

• The Bloomberg Dollar Spot Index fell 0.1%
• The euro rose 0.3% to $1.1271
• The Japanese yen rose 0.4% to 144.27 per dollar
• The offshore yuan was little changed at 7.2197 per dollar
• The British pound rose 0.2% to $1.3384

Cryptocurrencies

• Bitcoin was little changed at $105,557.15
• Ether rose 0.7% to $2,539.34

Bonds

• The yield on 10-year Treasuries was little changed at 4.44%
• Germany’s 10-year yield declined two basis points to 2.56%
• Britain’s 10-year yield declined four basis points to 4.63%

Commodities

• Brent crude was little changed
• Spot gold fell 0.5% to $3,214.94 an ounce

This story was produced with the assistance of Bloomberg Automation.

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