Paris stocks dip after US services activity misses expectations, fueling growth concerns amid Trump’s tariffs

The Paris stock market ended Tuesday with a modest retreat as a July ISM services report from the United States surprised to the downside, stoking concerns about a potential slowdown in the world’s leading economy amid Donald Trump’s tariff policy. The CAC 40 slipped 0.14% to 7,621.04 points, drifting from the previous session’s gain of 1.14%. The day’s move reflected investors’ cautious stance as tariff-related risks weighed on equities, even as some sectors remained resilient in the face of ongoing negotiations and policy shifts.

Market snapshot: Paris equities in a wary mood amid tariff talk

The Paris stock exchange, like global markets, has been navigating a sea of uncertainties tied to tariff measures and the trajectory of the US economy. Tuesday’s session underscored a delicate balance between the appeal of European equities, which had recently benefited from a softer tone in some global risk factors, and the pressure created by tariff headlines that can rapidly alter earnings outlooks across industries. The CAC 40’s modest decline belied the intraday volatility that often accompanies tariff announcements and economic data releases. Investors have been keenly monitoring the policy stance coming from Washington, as trade measures continue to shape the risk environment for European exporters and multinational corporations with exposure to the US market.

The daily performance also sits in the broader context of the stock market’s sensitivity to shifts in the growth outlook. While some days bring relief when data or statements tamp down fears, other sessions are characterized by renewed anxiety when indicators suggest that growth could slow down more than anticipated. In this environment, investors tend to react not only to headline tariff developments but also to nuanced signals about service-sector momentum and inflationary pressures, which can influence central-bank expectations and the policy path for major economies.

The broader European market backdrop is influenced by similar dynamics, as investors weigh the potential impact of tariffs on corporate margins and global supply chains. As the week unfolds, market participants will likely scrutinize further economic indicators, corporate results, and policy signals that could either reinforce a cautious stance or spark renewed risk appetite, depending on whether data provide more clarity about the trajectory of growth and inflation under tariff-related constraints.

ISM services index: signs of tepid growth amid tariff concerns

The month’s ISM non-manufacturing (services) index indicated a growth pace of 50.1% in July, down from 50.8% in June. The reading sits just above the boundary of 50%, which marks expansion; a reading below 50% would signify contraction. The data point signals that the United States’ service sector—traditionally the backbone of the American economy—continued to grow, albeit at a softer rate. The ISM report framed the July outcome as showing “ongoing but weak growth,” underscoring a fragile momentum that policymakers and market participants must monitor as trade tensions persist.

Respondents highlighted several headwinds tied to tariff measures, including a notable uptick in raw-material prices that added to cost pressures for service providers and manufacturers alike. This rising input cost environment can compress margins and influence pricing strategies, thereby affecting consumer-facing sectors and business investment decisions. The report’s emphasis on tariffs’ impact aligns with broader market narratives that tariff policy could translate into higher prices for inputs and goods, potentially feeding through to consumer prices and overall demand.

Analysts and market observers stressed the importance of this ISM reading given the United States’ status as a predominantly service-oriented economy. Alexandre Baradez, head of market analysis at IG France, noted that the service sector’s performance is highly influential in shaping the overall economic picture of the United States, making the ISM services index a key gauge of growth prospects. Against the backdrop of tariff deliberations and the looming tariffs’ entry into force in early August, investors were placing particular emphasis on service-sector momentum as a barometer of resilience or vulnerability within the US economy.

The ISM data comes as investors keep a close watch on tariff policies that could alter demand, supply chains, and pricing dynamics across industries. The ongoing tariff debate has heightened sensitivity to every data release that touches on growth, inflation, and the cost of doing business, because these variables influence both equity valuations and expectations for monetary policy. In this climate, even modest deviations in the ISM services index can be amplified by market participants who are assessing the odds of a sustained expansion in the US economy versus a potential slowdown.

Tariffs, sectors, and the policy-influenced risk landscape

Tariff policy continues to loom large over market sentiment, with expectations that new duties could be announced or adjusted in the near term. The American administration has indicated that additional tariffs could be introduced promptly, potentially at higher levels than previously anticipated, and has emphasized the possibility of escalating measures in response to perceived trade frictions. This stance has encouraged investors to prepare for a potentially tougher trading environment in times of tariff volatility, particularly for sectors that rely heavily on international trade or on complex supply chains.

Market participants have identified sectors that remain enveloped in uncertainty due to tariff exposure. Some areas, such as pharmaceuticals and spirits, were specifically noted as still operating in a gray zone where policy clarity is limited and outcome scenarios remain unsettled. Analysts have pointed out that while agreements may exist on certain aspects of trade, unanticipated developments could still trigger revisions to assumptions about business plans, costs, and competitive positioning. The possibility of further tariff increments or alterations to tariff structures could have material implications for sector profitability and investment decisions.

The tariff narrative is complemented by commentary from industry observers and fund managers who emphasize that the policy environment remains dynamic. Amélie Derambure, a diversified portfolio manager, highlighted that even with negotiated accords, “rebounds” or shifts in expectations remain possible as markets absorb the contours of policy changes and their economic consequences. She pointed to lingering uncertainty across parts of the economy, noting that while some policies have been concluded, others could still pivot quickly, affecting market trajectories.

The tariff conversation also intersects with the broader international arena, where policymakers in other countries may reassess strategic partnerships and long-term growth plans in response to the tariff regime. The potential for rapid policy shifts means that investors must remain vigilant and adaptable, ready to reposition portfolios in response to evolving trade tensions and the macroeconomic signals they provoke. In this environment, corporate earnings guidance, input cost trends, and currency dynamics add layers of complexity to market outlooks, reinforcing the need for thorough, evidence-based analysis to navigate the coming months.

Bond market update: French 10-year yield holds steady

On the fixed-income front, the yield on France’s 10-year government bond stood at 3.28% at the close, mirroring the previous session’s level. This stability in the debt market indicates that investors maintained a relatively balanced outlook on long-term interest rates in the face of tariff-driven headlines and mixed economic signals. In a climate of tariff uncertainties, the bond market’s response provides insight into risk sentiment and expectations for inflation, growth, and central-bank policy in Europe.

Yields at this level reflect a combination of factors, including expectations about the European Central Bank’s policy stance, inflation dynamics across the euro area, and the degree of risk premia demanded by investors for holding French government debt amid global trade concerns. The steady yield signals a degree of caution among fixed-income investors, who continue to weigh the potential for policy normalization, the trajectory of growth, and the impact of international trade tensions on domestic economic performance. Market participants will be watching forthcoming economic data and policy signals for further clues about whether yields may move higher or remain anchored as the tariff environment evolves.

Eutelsat: losses widen, but full-year results align with objectives

In corporate news, European satellite operator Eutelsat experienced a steep widening of net losses for its 2024/2025 financial year, a consequence of substantial asset impairments that weighed on the group’s bottom line. Despite the larger net loss, management stressed that the annual results were in line with the company’s strategic objectives, underscoring progress toward longer-term goals even as impairment charges and restructuring costs affected near-term profitability. The newly appointed chief executive, Jean-François Fallacher, who took the helm in May, emphasized that the results were consistent with the company’s plan, signaling continued execution of its strategic path amid a competitive environment.

Investors reacted to the earnings news with a marked response, sending Eutelsat’s stock up by 12.05% to 3.30 euros per share. The rally reflected investor relief that the company’s outcomes aligned with expectations at the strategic level, even as the market weighed the impact of impairments and the outlook for growth in the satellite and space-enabling segments. Eutelsat’s performance in a sector characterized by rapid technological evolution, consolidation, and intense competition from other operators and new entrants—including SpaceX with its Starlink project—has kept the stock under close scrutiny. The company’s management highlighted ongoing initiatives to monetize spectrum assets, optimize the fleet, and pursue strategic partnerships that could bolster long-term value creation, even as one-off impairment charges temporarily distorted earnings.

Analysts noted that the market’s positive reaction to the earnings report likely reflected confidence in management’s execution of the strategic plan and a belief that the impairment-driven losses would not derail the company’s longer-term value proposition. The commentary from Fallacher stressed a commitment to achieving key milestones and returning to sustainable profitability as the company continues to deploy capital in line with its strategic priorities. The stock’s rebound suggests that investors are focused on the durability of Eutelsat’s strategic program and the potential for operational improvements to translate into improved financial performance over time, even in a challenging competitive landscape.

Investor sentiment and outlook: navigating a tariff-influenced horizon

The confluence of weaker-than-expected US services growth, tariff policy tension, and mixed corporate news has created a nuanced market outlook for European equities. Investors remain attentive to the trajectory of US growth, the timing and scope of tariff implementations, and the potential spillover effects on global trade and investment. The ISM services reading, while indicating expansion, reinforces concerns about the pace of growth and the costs associated with tariff-driven price pressures, which can influence capex decisions and consumer demand across sectors.

As markets digest the latest data, attention turns to upcoming economic indicators, corporate earnings, and policy developments that could tilt sentiment. The resilience of certain sectors amid tariff headwinds will be tested by changes in input costs, supply-chain realignments, and potential currency fluctuations that affect competitiveness overseas. In this environment, portfolio diversification, robust risk management, and prudent scenario analysis remain essential for investors seeking to balance growth opportunities with downside protection.

Analysts suggest that while tariff-related uncertainty can weigh on near-term equity performance, it also creates opportunities for selective investing in companies with strong pricing power, diversified revenue streams, and geographic flexibility. The ability to adapt to evolving trade conditions and to navigate input-cost volatility may distinguish successful investments from those more exposed to tariff risk. Market observers will likely scrutinize the interplay between macroeconomic indicators, policy signals, and corporate guidance to form a more precise view of the trajectory for European indices, including the CAC 40, in the coming weeks and months.

Outlook: what to watch next

Looking ahead, traders and strategists will focus on several key watchpoints that could shape the near-term market direction. The first is the evolution of US tariff policy and any official announcements regarding new duties or adjustments to existing tariffs, as the August 7 deadline approaches for certain measures. Second, the ongoing assessment of US service-sector momentum, as reflected by subsequent ISM releases and related indicators, will be critical for gauging the strength of domestic demand and its implications for global trade. Third, the European rate environment and central-bank communications will be important, as expectations for monetary policy normalization or continued accommodation can influence discount rates and equity valuations. Finally, corporate earnings, particularly in industries with high exposure to tariffs or fluctuating input costs, will provide concrete evidence about the resilience of margins and the capacity for price discipline in the face of policy changes.

The current mix of data suggests a cautious but not catastrophic path for markets, with potential for selective gains in areas that demonstrate pricing power, operational efficiency, and strategic flexibility. For investors, the key lies in ongoing risk assessment, disciplined portfolio construction, and a readiness to respond to policy developments and data revisions that can rapidly alter the risk-reward balance in Europe and beyond.

Conclusion

The latest market movements reflect a delicate balance between cautious optimism and tariff-driven risk. While the CAC 40 declined modestly on Tuesday, the broader narrative centers on the US service sector’s growth trajectory, tariff policy implications, and the occasional bright spot in corporate results, such as Eutelsat’s subscription-like resilience in a challenging environment. The combination of a near-neutral bond yield, tepid but positive ISM service activity, and activity signals from major players across sectors suggests that markets are in a wait-and-see mode, ready to react to new information about trade policy, inflation, and economic momentum. As policy directions become clearer and data flow accelerates, investors will likely recalibrate expectations, seeking to balance the potential for steady gains with the need to manage macro-driven volatility in both the short term and the longer horizon.