Key Points
- European shares had their worst week in three months, driven by tariff fears and rate concerns.
- The STOXX 600 fell 1.1%, marking its largest weekly decline since September.
- U.S. President-elect Trump’s tariff threats over EU trade deficit spooked markets. Key sectors like banks, aerospace, and mining saw losses of up to 1.7%.
- Swiss biopharma Idorsia dropped 44% following failed drug talks, its worst one-day decline.
European shares faced significant losses on Friday, marking their worst week in three months. Investor sentiment took a hit following U.S. President-elect Donald Trump’s remarks about potential tariffs on the European Union. Trump’s demand that the EU purchase U.S. oil and gas to address its trade deficit with the U.S. added to existing worries about the outlook for U.S. interest rates, further unsettling the markets.
The pan-European STOXX 600 index dropped 1.1%, reaching its lowest point in nearly a month. The index was on track for its largest weekly decline since early September. With over €1 trillion in annual trade between the EU and the U.S., concerns about potential export disruptions have shaken investor confidence. Analysts like Derren Nathan of Hargreaves Lansdown warned that European economies, already struggling with flagging domestic demand, could face severe consequences if tariffs are imposed.
All major European sectors experienced losses, with banks, aerospace and defense, and miners bearing the brunt, declining between 1.2% and 1.7%. Germany’s DAX, France’s CAC 40, and Italy’s FTSE MIB each fell more than 1%, while the UK’s FTSE 100 fared slightly better, dropping 0.7%. British retail sales data for November showed a weaker-than-expected rise of 0.2%, further dampening economic optimism.
Markets were also influenced by the Federal Reserve’s projection of fewer rate cuts in 2025 and persistent inflation, which halted a strong rally in U.S. and European stocks. Investors closely monitor U.S. inflation data for clarity on next year’s monetary policy direction.
Individual stocks saw notable declines as well. Swiss biopharma firm Idorsia plunged 44% after talks over global rights to its hypertension drug Tryvio stalled, marking its largest single-day drop on record. Danish biotech Zealand Pharma also tumbled 9.7% after the FDA declined to approve its bowel disease treatment, placing it at the bottom of the STOXX 600. The STOXX 600 has risen 4.7% this year, starkly contrasting the 23% surge in the U.S. S&P 500 benchmark.
