Key Points
- European stocks fell for a second day on Tuesday over fears of a new trade war with the U.S.
- President Trump has threatened new tariffs on European allies over the dispute over Greenland. European leaders are preparing retaliatory measures.
- Citigroup has downgraded European equities amid increased uncertainty.
- New data from the U.K. shows slowing wage growth and a high unemployment rate.
European stock markets continued their slide on Tuesday, with investors still on edge over President Trump’s threat to impose new tariffs on several European allies. Major European markets closed lower, led by a 1.03% decline in Germany’s DAX. The downward trend was mirrored across the region, with the U.K.’s FTSE 100 falling 0.67% and France’s CAC 40 slipping 0.61%.
The sell-off began on Monday after Trump threatened to impose tariffs on several European countries unless the U.S. is allowed to purchase Greenland. Negative mood is expected to continue, as U.S. markets, which were closed for a holiday on Monday, are set to open sharply lower.
Trump has shown no signs of backing down. He said he will meet with European officials in Davos this week, but he also reiterated his demands, stating that “Greenland is imperative for National and World Security.”
European leaders have widely rejected Trump’s calls and are preparing their own retaliatory measures, which will be discussed at an emergency meeting on Thursday. In a sign of growing pessimism, Citigroup on Tuesday downgraded European equities, citing the uncertainty now clouding the outlook for corporate earnings.
Adding to economic worries, new data from the U.K. showed that wage growth is slowing and that the unemployment rate remains elevated at 5.1%. This has increased the likelihood of further interest rate cuts from the Bank of England.
In the corporate world, the British pharmaceutical giant GSK announced a $2.2 billion deal to acquire a California-based biotech company.
Oil prices were volatile, with Brent crude rising while U.S. crude fell. Traders are watching geopolitical tensions, but their main focus this week will be on a monthly report from the International Energy Agency, which is expected to provide more clues on the global supply-and-demand balance.
