European Shares Face Significant Decline

By Sruthi Shankar
Reuters

European shares are set for their worst week in three months as investors react to U.S. President-elect Donald Trump's comments regarding potential tariffs on the European Union, causing anxiety about the U.S. rate outlook.

The pan-European STOXX 600 index dropped 1.1%, reaching its lowest point in nearly a month, and is poised for its biggest weekly decline since early September.

Trump's comments emphasized that the EU must purchase U.S. oil and gas to address its "tremendous deficit" with the U.S., or face tariffs. Derren Nathan, head of equity research at Hargreaves Lansdown, remarked that with over 1 trillion euros in annual goods traded between the U.S. and the EU, any uncertainty regarding exports severely impacts confidence, especially with waning domestic demand in various continental nations.

All major European subsectors experienced declines, particularly banks, aerospace and defense, and miners, which fell between 1.2% and 1.7%.

Germany's DAX and France's CAC 40 both fell more than 1%, while Italy's FTSE MIB dropped by 1.3%. Danni Hewson, head of financial analysis at AJ Bell, stated that while investors were already considering potential risks, the President-elect's comments sharpened focus on these concerns.

Britain's FTSE 100 showed a modest decline of 0.7%. Recent data indicated British retail sales rose by a below-expected 0.2% in November, signaling slow economic momentum.

Investors are anticipating U.S. inflation data later in the day for insights into the pace of potential rate cuts in the upcoming year.

European stocks fell sharply on Thursday after the Federal Reserve hinted at fewer cuts in 2025 and rising inflation, ending a robust rally driven by expectations for easing monetary policies.

The STOXX 600 has gained 4.7% this year, whereas the U.S. S&P 500 has surged by 23%.

Idorsia's stock plummeted by 44%, poised for its largest one-day decrease on record, after the Swiss biopharma company reported stalled exclusive talks for global rights to its hypertension medication, Tryvio. Zealand Pharma also faced a decline of 9.7%, landing at the bottom of the STOXX 600 after the U.S. FDA rejected approval for its bowel disease drug.