Citi downgraded European stocks due to EU-US conflict over Greenland

Citi downgraded continental European stocks for the first time in more than a year. One of the largest Wall Street investment banks cited deteriorating relations between Brussels and Washington over U.S. President Donald Trump's desire to establish control over Greenland.

Citigroup investment strategist Beata Mantei downgraded her recommendation on European equities traded excluding the U.K. to "neutral" amid deteriorating short-term investment prospects, Bloomberg reports. "The latest round of transatlantic tensions and tariff uncertainty undermine the near-term investment case for European equities" and worsen the earnings outlook for the continent's companies, the agency quotes a Citi research note as saying.

Citi still forecasts growth in Europe's STOXX 600 stock index, but the bank now sees "a more attractive risk/return profile in other regions." The investment bank upgraded its rating on Japanese stocks from "neutral" to "above market" (Overweight) and said Japan has replaced Europe as its favorite.

European stocks, which outperformed U.S. stocks in 2025, collapsed on Jan. 19 after Trump announced new duties on countries that support Greenland. On Jan. 17, he announced on the social media network Truth Social that imports from eight NATO member countries into the U.S. would be subject to increasing duties "until a deal is reached on the full and final purchase of Greenland."

According to the statement of the American leader, from February 1, the duty rate will be set at 10%, and from June 1 it will increase to 25%. European leaders characterized these measures as "unacceptable". Shares of the region's automakers and luxury manufacturers fell on January 19. At the same time, securities of defense companies rose.

In June 2024, Citi downgraded European equities to "neutral" due to political instability in Europe. In October of the same year, the investment bank was one of the first on Wall Street to improve the recommendation on the European market to "above market". At that time, most investors still preferred to refrain from investing in the assets of the region, notes Bloomberg.

This article was AI-translated and verified by a human editor