Stoxx 600, FTSE, DAX, CAC

A fifth of the watches and jewelry made in Switzerland are exported to the United States.

Yet, that market is unlikely to uniformly feel the impact of the tariffs, according to analysts at Vontobel, a Swiss asset manager.

“[The tariffs] will likely affect the lower end of the watch segment more strongly,” Mark Diethelm, Vontobel’s senior equity analyst, said in a note to clients on Aug. 4.

“Another affected group is suppliers of machinery and tools, where the US represents around 15% of exports,” Diethelm added.

The specialized machinery and tools are often made by small companies, which are currently being challenged by several factors — including weak demand in Europe and China, a stronger Swiss franc and lower tariffs on Europe and Japan — that the Vontobel analyst called a “highly toxic cocktail.”

Yet the analyst remains hopeful for a deal with the U.S.

“We believe there is some hope for an agreement on US tariffs for Switzerland, which could bring the tariff level closer to the 15% baseline set for other countries,” Diethelm added.

“However, if the 39% tariff remains in place, earnings for the highlighted sectors and companies could be hit substantially, triggering shifts out of Switzerland.”

— Ganesh Rao

Switzerland’s blue-chip SMI index slightly pared losses to around 1.5% in early deals, as investors assess what’s ahead for U.S. tariffs. The broader Swiss All Share Index was also down around 1.5%.

Gianluigi Mandruzzato, senior economist at EFG Asset Management, told CNBC’s “Europe Early Edition” on Monday that the risk of a Swiss recession had increased after the announcement, with U.S. export tariffs affecting about 10% of the economy. The tariffs would also put deflationary pressure on the economy and therefore on the Swiss National Bank, which has already cut interest rates to zero, Mandruzzato added.

It remains “hard to tell” whether the government will be able to negotiate a better deal that the current 39% rate before the Aug. 7 implementation deadline, Mandruzzato said, with potential bargaining tools including higher purchases of U.S. energy or more direct investment by Swiss companies into the U.S.

Elsewhere, U.K. bank Lloyds jumped to the top of the Stoxx 600 index, last up 6.5%.

Lender Close Brothers is up more than 23% as investors digest Friday’s U.K. Supreme Court ruling and a weekend regulatory update on missold car loads in Britain.

Analysts at Jefferies said the Financial Conduct Authority’s plans for a compensation scheme “largely de-risk Lloyds’ shares from the scandal,” for which the bank has already set aside funds.

Lloyds said Monday that the ultimate impact on the group is still to be determined, but it does not expect a material change to its provision.

European markets are more broadly rebounding after the Stoxx 600 recorded its worst session since April on Friday. The regional gauge was last up 0.17%, with Germany’s DAX and France’s CAC 40 both up around 0.6%.

“The direct impact on the overall Swiss equity market from the newly announced US tariffs will be negative, but not destructive, in our view,” analysts at UBS said Friday, particularly as pharmaceutical products remain exempt from new U.S. tariffs at this stage.

“Certain parts of the market may be impacted more significantly, including watch and machinery manufacturers as well as parts of medtech. Moreover, smaller companies tend to be more reliant on exports and are thus more at risk.”

— Jenni Reid

U.K. lenders are set to face a bill of as much as £18 billion ($23.9 billion), according to the country’s Financial Conduct Authority, which looks to begin consulting on a redress scheme for people who were mis-sold car loans.

The U.K.’s Supreme Court on Friday overturned a ruling on car finance commissions that could have put certain banks on the hook for compensation payments stretching into the tens of billions. That original ruling, issued in October, sent shares in exposed lenders such as Lloyds, Barclays and Close Brothers lower and spurred them to set aside billions in potential compensation payouts.

The FCA on Sunday updated that it would look at an industry-wide compensation program, with payouts set to begin in 2026.

It estimated the cost would run between £9 billion and £18 billion, with most individuals likely to receive less than £950 in compensation.  

“On Friday, the Supreme Court… handed down its long-awaited motor finance judgement, concluding no liability for the banks in equity or tort. However, depending on the facts there could be liability under statute. This will likely be taken positively by the market today,” RBC Capital Markets said in a note Monday.

 Deutsche Bank Analyst Robert Noble said his base case remained that any redress scheme would be limited to a portion of the commissions, which is already covered by banks’ existing provisions.

— Jordan Butt, Jenni Reid

Traders will be closely-monitoring Swiss stocks this morning, after the shock news Friday that the country faces a 39% U.S. tariff rate from Aug. 7., when its markets were closed for a public holiday.

Switzerland’s Federal Council will reportedly meet this morning after business minister Guy Parmelin said the country is open to revising its trade offer to the U.S.

Swiss President Karin Keller-Sutter meanwhile finds herself in the centre of a domestic blame-game after a phone call with her US counterpart late Thursday failed to avoid one of the steepest levies in the world.

Watch firms and machinery-makers along with small export-reliant businesses are expected to be among the most-impacted.

— Jordan Butt

The second-quarter earnings season is starting to ease, with no major corporate reports Monday.

On the data front, traders will be keeping an eye on the latest monetary policy decision from the Turkish central bank and Spanish employment figures.

— Holly Ellyatt

Good morning from London, and welcome to CNBC’s live blog covering all the action and business news in European financial markets at the start of the new trading week.

Futures data from IG suggests a broadly positive open for European indexes, with London’s FTSE 100 seen opening 0.4% higher, France’s CAC 40 up 0.5%, Germany’s DAX up 0.4%, and Italy’s FTSE MIB 0.4% higher.

Regional bourses had closed lower on Friday, with the pan-European Stoxx 600 seeing its worst session since April, after the White House hit countries around the world with a range of new tariff rates on Aug.1.

While the European Union and the U.K. had already negotiated their own trade agreements, the news sent stocks lower around the world on global growth concerns. Stoxx 600 travel stocks closed 2.7% lower, while banks fell 2.9%.

Some global markets will be feeling the hangover of those tariffs into this week. Overnight, Asia-Pacific markets traded mixed as investors assessed the impact of tariffs, as well as the latest U.S. jobs report, which pushed Wall Street lower last Friday and spurred bets on a rate cut by the U.S. Federal Reserve next month.

Investors will also be watching oil prices after the OPEC+ oil producing alliance agreed on Sunday to raise oil production by 547,000 barrels per day for September. The output hike is the latest in a series of increases in production. Oil prices slipped in early Asian trade on Monday.

— Holly Ellyatt