European stocks fell due to Federal Reserve policy decisions and corporate earnings reports, while shares of Novo Nordisk and BMW rose, and US-China trade relations eased.

On May 7, 2025, European stock markets experienced a broad decline, with the pan-European Stoxx 600 index dropping by 0.54%. Investors were focused on the Federal Reserve's decision to maintain interest rates and on corporate earnings reports. Novo Nordisk from Denmark and BMW from Germany reported earnings that exceeded expectations, leading to their stock prices rising by 1.3% and 1.6%, respectively. U.S.-China trade relations have eased, as senior officials from both countries are scheduled to meet in Switzerland. The Bank of England is expected to lower interest rates by a quarter point on May 8 to address market volatility.

European Stock Markets Decline as Investors Eye Fed and Corporate Earnings

On May 7, major European stock markets fell across the board, reflecting the market's heightened attention to the upcoming interest rate decision by the U.S. Federal Reserve and corporate earnings reports. The pan-European Stoxx 600 index dropped 2.88 points to close at 533.47 points, a decline of 0.54%. In terms of sectors, healthcare stocks dropped 1.8%, and retail stocks fell 2%.

Major indices in various countries also declined simultaneously. Germany's DAX index fell 133.69 points or 0.58% to close at 23,115.96 points; the UK's FTSE 100 index dropped 38.09 points or 0.44% to 8,559.33 points, ending a 16-day streak of gains; France's CAC 40 index fell 70.08 points or 0.91% to close at 7,626.84 points.

The market generally believes that the Federal Reserve will keep interest rates unchanged, but investors are closely watching Chairman Jerome Powell's remarks at the post-meeting press conference for clues on future policy directions.

Novo Nordisk and BMW Beat Earnings Expectations, Stocks Rise Against Trend

Despite the overall market's gloomy atmosphere, some companies reported impressive earnings, driving their stock prices up against the trend. Danish pharmaceutical company Novo Nordisk announced first-quarter earnings for 2025 that exceeded market expectations. Although it lowered its full-year forecast, it still holds a 72% market share in the diabetes and obesity GLP-1 therapy market. The company's stock rose 1.3% on the day.

German automaker BMW also reported better-than-expected first-quarter earnings. Although revenue fell 7.8% year-on-year to 33.76 billion euros and net profit declined 26.4%, earnings per share reached 3.38 euros, surpassing market expectations. BMW stated that electric vehicle sales increased by 32.4% year-on-year, accounting for 26.9% of total deliveries. The company maintained its full-year forecast, expecting profits to be flat with 2024, and noted that some U.S. tariffs might be reduced starting in July. After the earnings report, BMW's stock rose 1.6%.

U.S.-China Trade Relations Show Signs of Improvement, High-Level Meeting in Switzerland

Amid ongoing global trade tensions, the U.S. and China have signaled a willingness to resume dialogue. U.S. Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer are scheduled to meet with Chinese Vice Premier He Lifeng in Switzerland this weekend to discuss economic and trade issues. This marks the first high-level meeting since the comprehensive tariffs were imposed by the Trump administration.

China's Ministry of Commerce stated that the meeting is being held "at the request of the U.S." and emphasized that dialogue must be based on equality and reciprocity. The U.S. side stated that the focus of the talks is on "cooling down" rather than reaching a major agreement immediately. The market generally sees this as an initial sign of potential improvement in bilateral relations.

Federal Reserve Holds Interest Rates Steady, Focuses on Tariff Policy Uncertainty

On May 7, the U.S. Federal Reserve announced that it would keep the benchmark interest rate unchanged, primarily due to the high uncertainty surrounding current tariff policies. Federal Reserve officials noted that the recent potential imposition of new tariffs by the Trump administration on pharmaceuticals and semiconductor products poses potential risks to inflation and the prospects for economic growth.

The market currently expects that the Federal Reserve will adjust its interest rate policy in the coming months based on economic data and trade policy developments.

Bank of England Expected to Cut Rates by a Quarter Point

The Bank of England is scheduled to hold a monetary policy meeting on May 8, and the market widely expects a quarter-point rate cut (25 basis points), lowering the benchmark interest rate from 4.5% to 4.25%. This decision reflects the central bank's response to recent market volatility and uncertainties in global trade.

Analysts point out that the Bank of England may adjust its quantitative tightening (QT) policy, especially against the backdrop of increased pressure in the long-term bond market. The market is also watching whether the central bank will further slow down the pace of its balance sheet reduction.

European stocks fell due to Federal Reserve policy decisions and corporate earnings reports, while shares of Novo Nordisk and BMW rose, and US-China trade relations eased.

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