Analysis of the Impact of Geopolitical Tensions on European Markets and Global Trade Equity Investments

Based on the latest market data and news, I have prepared an in-depth analysis report on the impact of geopolitical tensions on European markets and global trade equity investments.

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U.S. President-elect Trump has recently issued strong threats over the Greenland issue, triggering a sharp escalation in U.S.-EU trade tensions [1]. According to the latest updates:

• Tariff Threat Timeline
  : Starting from February 1, 2026, a
  10% tariff
  will be imposed on all goods exported to the U.S. from Denmark, Norway, Sweden, France, Germany, the UK, the Netherlands, and Finland. The tariff rate will increase to
  25%
  starting from June 1, 2026, until an agreement is reached on the “full and complete purchase of Greenland” [1]

• EU Response Measures
  : The EU will convene an emergency meeting of member state ambassadors in Brussels on January 18, 2026, to discuss the Greenland issue and the new tariff threats from U.S. President-elect Trump [1]

• European Military Response
  : Seven European countries have confirmed the deployment of military personnel to Greenland, including 15 from France, 13 from Germany, 2 from Norway, 3 from Sweden, 1 from the UK, 2 from Finland, and 1 from the Netherlands [3]

French Minister of Economy and Finance Roland Lescure clearly stated: “Greenland is the sovereign territory of a sovereign state that is a member of the EU, and its sovereignty shall not be wantonly trampled upon.” He also warned that if the U.S. insists on seizing Greenland, economic ties between the U.S. and the EU may suffer a heavy blow, and the EU does not rule out the possibility of imposing retaliatory tariffs [2][3].

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Based on the latest market data [0], the recent performance of the three major European stock indices is as follows:

Index	Closing on January 16	Daily Change	5-Day Performance	Range of Fluctuation
Euro Stoxx 50	6,029.45	-0.17%	+1.21%	5,850-6,040
German DAX	25,297.13	-0.15%	+1.73%	24,850-25,400
French CAC 40	8,258.94	-0.55%	+0.57%	8,250-8,510

:

• The French CAC 40 index performed the weakest, falling 0.55% in a single day, reflecting France’s high exposure to the U.S. market
• The German DAX index was relatively resilient, demonstrating the robustness of its diversified economic structure
• The Euro Stoxx 50 index currently remains above the 20-day moving average, and its technical pattern has not been completely broken

Sector performance in the U.S. market shows typical risk-off characteristics [0]:

:

• Industrial sector: +0.42% (Highly sensitive to trade, but benefits from expectations of increased defense spending)
• Financial services: +0.30% (Relatively defensive)
• Consumer staples: +0.25% (Stable demand for daily consumption)

:

• Technology sector: -0.51% (High valuations + supply chain concerns)
• Healthcare: -0.69% (Policy uncertainty)
• Consumer discretionary: -0.79% (Concerns over luxury goods exports)
• Utilities: -2.93% (Capital rotation to safer assets)

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Based on an analysis of export dependence on the U.S., the following industries are most directly affected by the tariff threats:

Industry	Exposure Index	Main Affected Companies	Risk Level
Luxury Goods	82	LVMH, Hermès, Kering Group	🔴High
Automotive	78	BMW, Mercedes-Benz, Volvo	🔴High
Chemicals	72	Bayer, BASF	🟠Medium-High
Machinery	68	Siemens, ABB	🟠Medium-High
Financial Services	55	HSBC, UBS, Deutsche Bank	🟡Medium
Retail	48	H&M, Inditex (parent company of Zara)	🟡Medium
Food & Beverage	42	Nestlé, Danone	🟢Low

(Most Affected):

• LVMH Group
  : The U.S. market accounts for approximately 28% of its revenue. If the 25% tariff is implemented, its revenue may decline by 7-10%
• Hermès
  : Highly sensitive to the U.S. market, its stock price may come under pressure
• Kering Group
  : Brands such as Gucci have high dependence on the U.S. market

:

• BMW Group
  : The U.S. is one of its largest single markets, and MINI models are mainly exported from Mexico
• Mercedes-Benz Group
  : High-end SUV models face tariff pressure
• Volvo
  : Although acquired by Geely, its production bases are still located within the EU

:

• SAP
  : The impact on its enterprise software services is relatively limited, but euro depreciation may affect its U.S. dollar-denominated earnings
• Siemens
  : Exports of industrial automation equipment may be affected

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1. Reduce Holdings in High-Exposure Industries
   (Recommendation Strength: 85%)
   • Sell or reduce holdings in luxury goods stocks such as LVMH and Kering Group
   • Reduce exposure to automakers such as BMW and Mercedes-Benz
   • Reduce allocations to chemical companies with high export dependence on the U.S.

2. Increase Holdings in Defensive Sectors
   (Recommendation Strength: 75%)
   • Utilities sector (power, water) has stable cash flows
   • Healthcare sector (especially innovative drug companies)
   • Consumer staples (Nestlé, Unilever)

3. Increase Gold Allocations
   (Recommendation Strength: 70%)
   • As a traditional safe-haven asset, gold performs well when geopolitical risks rise
   • It is recommended to increase its allocation to 5-10% of the portfolio

4. Focus on Companies with Local Operations
   (Recommendation Strength: 80%)
   • Companies with a high proportion of local operations in Europe are less affected by tariffs
   • Localized industries such as telecommunications and real estate investment trusts (REITs)

1. Hedging Strategies
   :
   • Purchase Euro Stoxx 50 put options to protect against downside risks
   • Consider volatility strategies (VIX-related products)

2. Exchange Rate Risk Management
   :
   • The EUR/USD exchange rate may come under pressure
   • Export enterprises need to pay attention to exchange rate hedging

3. Structural Opportunities
   :
   • Monitor possible economic stimulus policies introduced by the EU
   • Seek out companies that benefit from supply chain restructuring

1. Supply Chain Diversification Theme
   :
   • Companies are accelerating supply chain restructuring amid tariff threats
   • Focus on European companies with production bases in North America and Asia

2. Defense and Military Industry Sector
   :
   • Geopolitical tensions are favorable for increased defense spending
   • Focus on European local defense companies

3. Rare Earths and Critical Minerals
   :
   • The Greenland incident highlights the strategic value of rare earths
   • Focus on rare earth mining and processing enterprises

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Risk Factor	Probability of Occurrence	Potential Impact	Risk Level
Short-Term Market Volatility	75%	70%	🔴High
Trade War Escalation	65%	85%	🔴High
Geopolitical Conflict	70%	80%	🔴High
Supply Chain Disruption	55%	75%	🟠Medium-High
Sharp Exchange Rate Fluctuations	60%	55%	🟡Medium
EU Economic Recession	35%	70%	🟡Medium

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Date	Event	Potential Impact
January 18, 2026	EU Emergency Ambassador Meeting	Market sentiment sensitivity period
February 1, 2026	10% tariff takes effect	First wave of impact
Mid-February 2026	Earnings season begins	Adjustments to corporate performance guidance
March 2026	Possible EU retaliatory measures	Risk of trade war escalation
June 1, 2026	Tariff increases to 25%	Second wave of impact

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1. Increased Short-Term Market Volatility
   : U.S.-EU trade tensions will continue to affect market sentiment in the coming weeks, and volatility may rise by 15-25%
2. Widening Sector Differentiation
   : Industries with high export exposure to the U.S. (luxury goods, automobiles) will face greater pressure, while defensive sectors are relatively resilient
3. Expectations of Policy Intervention
   : The EU may introduce coordinated response measures, including economic stimulus packages and possible retaliatory tariffs
4. Far-Reaching Long-Term Impacts
   : If the situation continues to escalate, it may reshape the global trade pattern and accelerate the regional restructuring of supply chains

• Current Recommendation
  : Maintain caution, reduce holdings in high-exposure industries, and increase allocations to defensive assets
• Position Management
  : Reduce European equity exposure by 10-15%, and increase allocations to cash and gold
• Hedging Protection
  : Consider purchasing options to protect the portfolio against downside risks
• Continuous Tracking
  : Closely monitor the results of the EU emergency meeting on January 18 and subsequent policy developments

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[1] National Business Daily - “EU to Hold Emergency Meeting to Discuss Greenland and U.S. Tariff Issues” (https://www.nbd.com.cn/articles/2026-01-18/4224625.html)

[2] RFI - “Trump’s Tariff Pressure on Greenland: EU Warns of Rising Risks; UK, France, Denmark Clearly Oppose” (https://www.rfi.fr/cn/中国/20260117-特朗普关税施压格陵兰-欧盟警告风险升级-英法丹麦明确反对)

[3] National Business Daily - “Starlink Becomes a Geopolitical Conflict Tool; Unpacking Musk’s SpaceX Fundraising Logic; Fed Chair Nominee Changes; Europe Deploys Troops to Greenland” (https://www.nbd.com.cn/articles/2026-01-17/4224399.html)

[0] Jinling AI Market Data - Performance data of major European stock indices and sectors

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: This report is for reference only and does not constitute investment advice. Investors should make investment decisions based on their own risk tolerance and closely monitor market changes.