European Stocks Close Lower As Trade War Fears Resurface

European stocks closed weak on Tuesday as trade war fears resurfaced after U.S. President-elect Donald Trump pledged to impose tariffs on all imports from Mexico, Canada and China immediately after taking office in January 2025.

This is in response to illegal immigration and “crime and drugs” coming across the border from these countries to the United States, according to him.

“On January 20th, as one of my many first Executive Orders, I will sign all necessary documents to charge Mexico and Canada a 25% Tariff on ALL products coming into the United States, and its ridiculous Open Borders,” Trump said in a statement posted on Truth Social Monday. “This Tariff will remain in effect until such time as Drugs, in particular Fentanyl, and all Illegal Aliens stop this Invasion of our Country!”

Trump added that import duty on Chinese goods will go up by 10% until Beijing takes action to stem the flow of illegal drugs into the U.S.

French political tensions also weighed on markets after far-right leader Marine Le Pen said on Monday that she could bring down France’s minority government by the end of the year unless changes are made to the country’s budget bill.

Meanwhile, traders awaited the release of the FOMC minutes later in the day for insights into the Fed’s policy path.

The pan European Stoxx 600 ended down 0.57%. The U.K.’s FTSE 100 closed down 0.4%, Germany’s DAX and France’s CAC 40 settled lower by 0.56% and 0.87%, respectively. Switzerland’s SMI finished 0.39% down.

Among other markets in Europe, Austria, Belgium, Finland, Ireland, Netherlands, Norway, Poland, Portugal, Russia, Spain, Sweden and Turkiye closed weak.

Denmark, Greece and Iceland ended on a positive note.

In the UK market, Beazley, ICG, Glencore, Rentokil Initial, Lloyds Banking Group, Prudential, Weir Group and Halma closed down 2 to 3.6%.

Persimmon, Rio Tinto, Mondi, Berkeley Group Holdings, JD Sports Fashion, B&M European Value Retail, Experian, Barratt Redrow, Frasers Group, Kingfisher and Legal & General lost 1.4 to 2%.

Melrose Industries rallied 7.7%. Intertek Group climbed about 3.3%. Imperial Brands, Scottish Mortgage, WPP, Pershing Square Holdings, Sage Group and Compass Group gained 1 to 2%.

Halfords jumped nearly 15%. The bicycle and car products retailer has asked for more business support from the government to cope with the cost implications from the recent U.K. budget.

In the German market, Daimler Truck Holding ended nearly 6% down. Bayer closed down 4.8%. Volkswagen, Fresenius Medical Care, Zalando, BASF, Deutsche Post, Beiersdorf, Siemens Energy, Fresenius, BMW, Mercedes-Benz, HeidelbergCement and Deutsche Bank ended lower by 0.9 to 2.5%.

MTU Aero Engines gained about 2%. Rheinmetall and Puma also closed with strong gains.

In the French market, Stellantis tumbled nearly 5%. ArcelorMittal closed down 3.7%. Credit Agricole, Eurofins Scientific, Societe Generale, TotalEnergies, Air Liquide, Perond Ricard, Vivendi, Engie, Airbus Group, Veolia and Essilor closed lower by 1 to 2.2%.

Kering climbed about 1.3%. LVMH and Thales posted moderate gains.

In economic news, German business sentiment softened in November on a notable deterioration in current conditions as economic struggles deepened, survey results from ifo Institute showed. The business climate index fell to 85.7 in November from 86.5 in the previous month. The score was expected to fall moderately to 86.0. At 84.3, the current situation index dropped to the lowest since July 2020.

A report from the British Retail Consortium said UK shop prices dropped at a slower pace in November, signalling that shoppers are set to face rising price pressures. The shop price index declined 0.6% on a yearly basis in November, slower than October’s 0.8% decrease. Food price inflation softened to 1.8% from 1.9% in October.

UK retailers expect sales to fall further next month despite festive season and their sentiment about situation over the next three months dropped the most in two years in November, according to the latest quarterly Distributive Trades Survey from the Confederation of British Industry.

The index measuring business situation for the next three months declined sharply to -21% from -13% in August. This was the weakest since November 2022.

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