European stocks experienced a marked decline on Tuesday, with several markets suffering their largest single-session drop in weeks. Concerns focused on the potential negative impact of Donald Trump's protectionist policies on the global economic and political landscape, which heavily influenced investor sentiment.
A notable selling pressure in mining stocks, driven by a significant decrease in metal prices, played a major role in the market's downturn. Reports suggest U.S. President-elect Donald Trump intends to appoint Michael Waltz as his national security adviser and Marco Rubio as secretary of state, pointing towards a potentially assertive stance on China, Iran, and Venezuela.
In political developments, data provider DDHQ confirmed that Trump's Republican Party secured a majority in the U.S. House of Representatives, indicating Republican control of both congressional chambers.
There are growing fears that Trump’s proposed steep tariff increases could spark inflation, thereby limiting the Federal Reserve's ability to lower interest rates. Such tariffs also pose the threat of retaliation from key trading partners.
Economically, attention is focused on the upcoming U.S. consumer price inflation data release on Wednesday, alongside a series of addresses by Federal Reserve officials, including Fed Chair Jerome Powell scheduled for Thursday.
In market movements, the pan-European Stoxx 600 index fell by 1.98%. The UK's FTSE 100 decreased by 1.22%, Germany's DAX dropped 2.13%, France's CAC 40 was down 2.69%, and Switzerland's SMI declined by 1.6%.
Elsewhere across Europe, markets in Austria, Belgium, Denmark, Finland, Ireland, Netherlands, Poland, Portugal, Russia, Spain, and Sweden saw losses ranging from 1% to 3%. Iceland and Norway experienced modest downturns, whereas Greece made slight gains.
In the UK market, Vodafone Group plummeted more than 8% following a decline in revenue from its largest market, Germany. Fresnillo fell nearly 8%, while Vistry Group, Prudential, Anglo American Plc, Croda International, EasyJet, Airtel Africa, and Glencore lost between 3.2% and 5.6%. Companies like Frasers Group, WPP, Barratt Development, Mondi, and Rolls-Royce Holdings registered declines between 2% and 3%.
In contrast, Convatec Group surged over 22% after announcing is on course to achieve double-digit adjusted earnings per share growth for the year and raising its organic sales growth forecast. DCC rose by 14.2% with its announcement of plans to divest its healthcare division and consider strategic options for its technology segment. RightMove enjoyed a 2.65% increase, while Smith & Nephew and Centrica recorded gains of nearly 2% and 1.1%, respectively.
In Germany, Bayer's shares plunged more than 15% following the announcement of a third-quarter loss and weak adjusted EBITDA, alongside nearly flat sales. Despite a narrower net loss compared to the previous year, EBIT loss widened. The company also lowered its fiscal 2024 adjusted EBITDA forecast due to weaker-than-expected agricultural market performance, although it maintained its sales growth and core earnings per share guidance. Brenntag saw an 8% decline, while other major players like BASF, Continental, Siemens, and Allianz posted losses ranging from 2% to 4.3%. However, Infineon rallied more than 4%, and Rheinmetall rose by about 1.3%, with Sartorius also ending modestly higher.
The French market saw Kering's shares decline by over 6%, while LVMH, ArcelorMittal, and Schneider Electric experienced decreases between 2% and 5%. However, STMicroElectronics gained approximately 3.75%.
From an economic standpoint, the UK's unemployment rate rose more than anticipated in the third quarter, coupled with softening wage growth, intensifying pressure on the Bank of England to potentially lower interest rates. As per the Office for National Statistics, the unemployment rate increased to 4.3% in September from 4% in the previous three-month period, higher than the expected 4.1%.
In Germany, inflation rebounded in October driven by increased food prices and higher-than-average service costs, with the consumer price index rising back to 2% year-on-year, as corroborated by final data from Destatis. This follows a 1.6% increase in September. Moreover, German economic sentiment deteriorated in November, affected by Donald Trump's U.S. presidential election victory and the dissolution of the German governmental coalition. Findings from the ZEW Indicator of Economic Sentiment indicated a drop to 7.4 in November from 13.1 in October, where expectations were for the index to remain stable at around 13.
