European Stocks Close Notably Lower On Trade War Fears

(RTTNews) - European stocks closed notably lower on Monday, as imposition of punitive tariffs by the U.S. President Donald Trump on Canada, Mexico and China and his warning that the European Union and the UK could be the next target for the levies triggered a sell-off across the board.

The Trump administration's 25% tariffs on Canada and Mexico came into force on Saturday (February 1). Canadian energy faces a 10% tariff as do Chinese goods, effective Wednesday (February 5).

The levy by the Trump administration has raised fears of a potential trade war and concerns about global economic outlook.

Markets trimmed their losses a bit after Trump agreed to delay tariffs on Mexico after coming to terms with Mexican President Claudia Sheinbaum Pardo to send troops to secure the U.S.-Mexico border.

Following the conversation with the Mexican President, Trump postponed tariff imposition until March, easing concerns that tariffs on the EU are unavoidable.

The downside in the UK market was slightly less pronounced compared to that of Germany and France, as Trump said that the UK might be able to dodge tariffs, despite being "out of line" in terms of trade.

The US President expressed optimism He expressed optimism about resolving the trade imbalance with Britain, stating, "I think that one can be worked out."

Automobile, technology, luxury and mining stocks were among the major losers.

The pan European Stoxx 600 closed down 0.87%. The U.K.'s FTSE 100 lost 1.04%, Germany's DAX ended down 1.4% and France's CAC 40 settled lower by 1.2%, while Switzerland's SMI finished 0.4% down.

Among other markets in Europe, Austria, Belgium, Denmark, Finland, Greece, Iceland, Ireland, Netherlands, Norway, Poland, Portugal, Russia, Spain, Sweden and Turkiye all ended week, recording sharp to moderate losses.

In the UK market, JD Sports Fashion closed down 4.7%. Scottish Mortgage, Pershing Square Holdings, Croda International, Ashtead Group, Weir Group, HSBC Holdings, Associated British Foods, Standard Chartered, Alliance Witan, Antofagasta, Glencore, Barclays Group and Next lost 2 to 4%.

Coca-Cola, Vodafone Group and Fresnillo gained nearly 2%. BT Group, Admiral Group, IAG, 3i Group, Imperial Brands, National Grid, BAE Systems, Airtel Africa and Compass Group gained 0.5 to 1.2%.

In the German market, Volkswagen, Siemens Energy, BASF, Porsche, Puma, Deutsche Bank, Mercedes-Benz, Daimler Truck Holding, Bayer, Siemens, Continental, Infienon, BMW and Sartorius lost 2.5 to 4.5%.

SAP, Deutsche Post, Siemens Healthineers, Brenntag, Commerzbank, Merck and HeidelbergCement also ended notably lower.

MTU Aero Engines, Rheinmetall, Deutsche Boerse, Deutsche Telekom and Fresenius posted moderate gains.

In the French market, Stellantis lost about 4.4%. Kering, Saint Gobain, STMicroElectronics, Schneider Electric, Societe Generale, Legrand, Pernod Ricard, LVMH, Teleperformance and BNP Paribas closed lower by 2 to 4%.

Vivendi climbed about 1.7%. Thales, Eurofins Scientific, Carrefour and Orange posted modest gains.

On the economic front, eurozone inflation edged up in January due to the acceleration in energy price growth but the intended easing path of the European Central Bank is unlikely to be influenced by the modest increase.

Inflation in the euro area increased to 2.5% in January, while it was expected to remain at December's rate of 2.4%, flash data from Eurostat revealed.

Core inflation that strips out prices of energy, food, alcohol and tobacco, held steady at 2.7% in January.

Data from S&P Global showed that the manufacturing PMI in Germany increased to 45 points in January from 42.50 points in December of 2024.

the HCOB France Manufacturing PMI came in at 45 in January 2025, slightly lower than initial estimates of 45.3, but up from 41.9 in December, according to a report released by S&P Global today.

The euro area manufacturing sector shrank at a slower pace in January as contractions in output, orders, inventories and purchasing activity slowed, final survey results from S&P Global showed.

The final HCOB manufacturing Purchasing Managers' Index rose to an eight-month high of 46.6 in January from 45.1 in December. The flash reading was 46.1.

Although the reading was below the critical 50.0 threshold, it signaled the softest fall since May last year.

The S&P Global UK Manufacturing PMI stood at 48.3 in January 2025, slightly above the preliminary estimate of 48.2 and up from December's 11-month low of 47.0. Still, the index continued to signal a sharp deterioration in operating conditions, as manufacturing output contracted for the third consecutive month due to new orders falling for a fourth straight month on weak demand in domestic as well as overseas markets.