European stocks slide as Trump’s warning to EU spooks investors

5:43 am Friday, December 20th, 2024

By Sruthi Shankar

(Reuters) – European shares were on course to post their worst week in three months on Friday, as U.S. President-elect Donald Trump’s comments about potential tariffs on the European Union spooked investors already worried about the U.S. rate outlook.

The pan-European STOXX 600 index fell 1.1% to its lowest in nearly a month and was on course for its biggest weekly decline since early September.

Trump said that the EU must purchase U.S. oil and gas to make up for its “tremendous deficit” with the world’s largest economy, or face tariffs.

“There’s over 1 trillion euros of goods traded between the U.S. and the EU each year, and with domestic demand flagging in many continental nations, any question mark over exports is going to shake confidence to its core,” said Derren Nathan, head of equity research at Hargreaves Lansdown.

All the major European subsectors declined, with banks, aerospace and defence and miners leading losses, falling between 1.2% and 1.7%.

The German DAX and France’s CAC 40 fell more than 1% each, while Italy’s FTSE MIB dropped 1.3%.

“Investors had already begun pricing in the potential risk, but the President-elect’s comments today will have focussed minds,” said Danni Hewson, head of financial analysis at AJ Bell.

Britain’s FTSE 100 posted a relatively smaller decline, down 0.7%. Data showed British retail sales rose by a weaker-than-expected 0.2% in November, adding to signs of slow momentum in the economy.

Investors are awaiting U.S. inflation data later in the day for further hints on the pace of rate cuts next year.

European stocks tumbled on Thursday after the Federal Reserve projected fewer cuts in 2025 and higher inflation, halting a stunning rally in U.S. and European stocks that were supported by hopes of easing monetary policy.

The STOXX 600 is up 4.7% so far this year compared with a 23% surge in the U.S. benchmark S&P 500.

Idorsia tumbled 44%, and was on track for its deepest one-day decline on record, after the Swiss biopharma company said exclusive talks for global rights to hypertension medication Tryvio had stalled.

Zealand Pharma dropped 9.7% to the bottom of the STOXX 600, after the U.S. FDA declined to approve the Danish biotech group’s bowel disease drug.

(Reporting by Sruthi Shankar in Bengaluru; Editing by Mrigank Dhaniwala and Varun H K)