Europe close: Stocks in the red as euro gains on dollar

28th Jan 2026 15:13

(Sharecast News) - European shares closed lower on Wednesday as investors digested another heavy slate of corporate earnings and trading updates, while currency markets were rattled by renewed weakness in the US dollar following comments from president Donald Trump.

The pan-European Stoxx 600 fell 0.66% to 609.08, with losses broad-based across the region.

Germany's DAX slipped 0.2% to 24,843.54, France's CAC 40 dropped 0.91% to 8,078.25 and the UK's FTSE 100 declined 0.52% to 10,154.43.

The pullback came despite pockets of resilience earlier in the session, with Russ Mould, investment director at AJ Bell, noting that "there was some optimism in the air ahead of a crunch week for US earnings, accompanied by a dollop of central bank action as the Federal Reserve makes its latest decision on interest rates."

He added that "most observers expect the Fed to stick at current rates for now as speculation continues to swirl about successors to current chair Jerome Powell," highlighting the policy uncertainty hanging over global markets.

Currency moves were firmly in focus after the euro strengthened to $1.20 against the dollar, marking a four-year low for the greenback, after Trump said the dollar's value was "great" when asked whether it had fallen too far.

Patrick Munnelly, market strategy partner at TickMill, said the remark had a dramatic impact, explaining that "after a prolonged period of calm in the foreign exchange space, the currency market has been jolted awake by a surge in dollar selling."

He added that "what started as steady selling quickly escalated into a full-blown sell-off, pushing the euro above $1.20 for the first time in over four and a half years."

The sharp currency moves fuelled renewed demand for safe havens, pushing gold prices briefly through the $5,300-an-ounce mark for the first time.

Emma Wall, chief investment strategist at Hargreaves Lansdown, said the dollar had suffered "the worst day for the greenback since Liberation Day, falling to levels not seen since 2022, and off the back of 2025 being the worst year since 2017."

She described the sell-off as "self-inflicted," adding that Trump's shift from criticising weak currencies to highlighting their benefits for exports marked a sharp reversal, noting that "devaluing your currency to boost exports is something Trump has accused other nations of in the past."

Munnelly echoed the theme, saying that "gold soared to an all-time high ... continuing its swift climb driven by the declining strength of the dollar," while warning that "the risks tied to holding dollars in the Trump era are becoming increasingly apparent."

German consumer sentiment tentatively improves

On the macro front, German consumer sentiment showed tentative improvement.

The GfK and NIM consumer climate indicator for February rose to -24.1 from -26.9 in January, with willingness to buy improving to -4.0, economic expectations rising to 6.6 and income expectations turning positive at 5.1.

Rolf Buerkl of NIM said the recovery had reversed a significant portion of last month's losses but cautioned that confidence remained fragile amid geopolitical risks and potential trade conflicts.

US data added to the cautious backdrop.

Mortgage applications fell 8.5% in the week ended January 23, according to the Mortgage Bankers Association, trimming part of the 47% surge seen since the start of 2026.

Refinancing applications dropped 16% week-on-week as benchmark mortgage rates hit a three-week high, while home purchase applications were broadly flat.

Munnelly noted that markets remained finely balanced ahead of policy signals, with "key tests loom[ing] with the Fed's policy decision and tech giants reporting earnings Wednesday."

Luxuries in the red as Volvo pops

In equities, luxury stocks led declines after disappointing results from LVMH, with the stock sliding 7.31%.

Shares in Christian Dior fell 6.34% and Kering dropped 3.27% in sympathy.

In the semiconductor space, ASML ended 1.66% lower after reversing early gains despite reporting stronger-than-expected orders and lifting its 2026 sales outlook.

Russ Mould said that "ASML's latest results suggest the AI boom is still in full swing, with strong orders and a bullish outlook," but cautioned that restructuring plans showed the company was "not getting carried away with the strength of current trading," adding that it was "a sign that the AI craze might be trying to catch its breath."

ASMI also slipped 1.38%, while STMicroelectronics rose 1.94% and Infineon gained 3.08%, as investors continued to rotate within the sector.

Munnelly highlighted that "major chipmakers ramp up spending to meet rising AI-related needs from cloud giants like Microsoft, Amazon, and Google," underpinning medium-term demand despite near-term volatility.

Elsewhere, Volvo Group advanced 2.63% after the Swedish truck maker reported a smaller-than-feared decline in fourth-quarter operating profit, offering a rare bright spot in an otherwise subdued European session, as investors remained cautious ahead of the Federal Reserve's rate decision later in the global day.

Reporting by Josh White for Sharecast.com.