Insights 
VT 
European indices experienced minimal changes at the start of the week. Eurostoxx, Germany DAX, France CAC 40, and UK FTSE each rose by 0.1%, while Spain’s IBEX fell by 0.1%, and Italy’s FTSE MIB decreased by 0.6%.
Stellantis announced a net loss of €2.3 billion in the first half, largely due to tariff impacts. The S&P 500 futures increased by 0.2%, contributing to a steady market sentiment. Upcoming US-EU trade talks are a point of attention before the 1 August deadline. Tech stocks are awaiting earnings reports from Google/Alphabet and Tesla later in the week.
Market Opportunities
Given the tentative mood Low describes, we see the current calm as an opportunity. The Euro Stoxx 50 Volatility Index (VSTOXX) is hovering near a three-month low around 14, making options relatively cheap. We believe this is an ideal time to purchase protection or position for a significant market move before one materializes.
The approaching August 1st deadline for US-EU trade talks presents a binary event risk that the market is underpricing. Historically, such trade deadlines, like those seen during the 2018-2019 period, have triggered sharp increases in volatility regardless of the outcome. We suggest traders could buy straddles on the Germany 40 index, positioning to profit from a large swing once a decision on steel and aluminum tariffs is announced.
The foreshadowing from the carmaker’s loss is a critical signal for sector-specific plays. Recent data from the European Automobile Manufacturers’ Association (ACEA) already shows new car registrations in the EU fell by 2.6% in the first half of the year, confirming underlying weakness. Consequently, we are looking at buying put options on the STOXX Europe 600 Automobiles & Parts index to hedge against further tariff-related fallout.
Impact of Us Tech Earnings
While European macro issues are key, the mention of US tech earnings should not be ignored, as they often dictate sentiment for global growth stocks. A strong report from a company like Alphabet could lift the entire tech sector, including European counterparts like SAP and ASML. For this, we see value in short-dated call options on European technology ETFs to capture any potential positive contagion from across the Atlantic.
