European Stocks Face Worst Weekly Decline in Three Months Due to Trade Tensions
European stocks edged higher on Friday but were still set for their biggest weekly loss in three months. The pan-European STOXX 600 rose 0.4% by 09:50 GMT but remained down by 2% for the week. This marked its steepest drop since December 2024, as rising global trade tensions fueled concerns about economic growth.
U.S.-EU Trade Dispute Weighs on Market Sentiment
The ongoing trade dispute between the U.S. and the European Union worsened this week. U.S. President Donald Trump threatened to impose a massive 200% tariff on European wines and other alcoholic beverages. This move was a response to the EU’s existing tariffs on American whiskey, intensifying economic tensions between the two regions.
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Automotive Sector Faces Heavy Losses
The European automotive industry took a major hit due to trade uncertainties. BMW reported a sharp decline in profits for 2024, with earnings falling by over one-third to €7.68 billion. As a result, its shares dropped 3.7%. Other major carmakers, including Renault, Volkswagen, and Stellantis, also saw their stocks fall by 1.4%, 1%, and 1.2%, respectively.
Defense and Aerospace Stocks Rise
Despite the broader market downturn, the European aerospace and defense sector performed well. These stocks gained 1.8% as expectations of higher military spending in Europe boosted investor confidence.
Music Industry Takes a Hit
The media sector also suffered losses, with Universal Music Group (UMG) being one of the biggest losers. Its shares plunged 10.5% after Bill Ackman’s investment firm, Pershing Square, reduced its stake in the company.
Economic Indicators Add to Market Worries
Weak economic data added more pressure on European markets. Germany’s inflation fell unexpectedly, raising hopes for potential interest rate cuts by the European Central Bank. Meanwhile, the UK economy shrank by 0.1% in January, with the industrial sector declining by 0.9%. Manufacturing and construction were the most affected industries.
Political Uncertainty in Portugal Affects Sentiment
Political developments also influenced European stocks. In Portugal, President Marcelo Rebelo de Sousa announced an early parliamentary election, creating uncertainty that unsettled investors.
Gold Prices Surge Amid Market Uncertainty
The ongoing trade war and economic instability pushed investors toward safe-haven assets. Gold prices surged past $3,000 an ounce as traders sought protection from market volatility.
Global Fund Outflows Reflect Investor Caution
Investor confidence in European stocks declined sharply. European equity funds saw $5.29 billion in outflows, marking the first withdrawal in eight weeks. The heightened trade tensions likely played a key role in this trend.
A Tough Week for European Markets
Although European stocks saw a small recovery on Friday, they ended the week on a negative note. Trade tensions, weak economic indicators, and political uncertainty contributed to the worst weekly decline in recent months. Investors remain cautious, closely watching future developments in global trade and European’s economic policies.
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