European stocks concluded Tuesday's trading session on a negative note, spurred by renewed apprehensions about a potential trade war. This followed a declaration from U.S. President-elect Donald Trump, who vowed to enforce tariffs on all imports from Mexico, Canada, and China immediately upon assuming office in January 2025. The proposed tariffs are President-elect Trump's response to what he terms as illegal immigration and the influx of "crime and drugs" across these borders into the United States.
In a statement released on Truth Social, Trump asserted, "On January 20th, as one of my first Executive Orders, I will sign all necessary documents to charge Mexico and Canada a 25% Tariff on all products entering the United States due to their absurd Open Borders policy. This tariff will remain in place until the menace of drugs, particularly Fentanyl, and illegal immigration is curbed." Furthermore, he mentioned that imports from China would face a 10% duty increase until the country takes measures to control the illegal drug trade into the U.S.
Market sentiment was further dampened by political turbulence in France. Marine Le Pen, a prominent far-right leader, threatened to destabilize France's minority government by year-end unless amendments are made to the national budget bill. Investors are also on edge awaiting the release of the Federal Open Market Committee (FOMC) minutes expected later, which could offer clues regarding the Federal Reserve's monetary policy trajectory.
The pan-European Stoxx 600 index slipped by 0.57%, while the UK’s FTSE 100 fell by 0.4%. Germany’s DAX and France’s CAC 40 indices declined by 0.56% and 0.87%, respectively. The Swiss SMI also closed weaker, down 0.39%.
Several European markets, including Austria, Belgium, Finland, and others, ended the day with losses. Conversely, Denmark, Greece, and Iceland managed to buck the trend, closing in positive territory.
In the UK market, shares of Beazley, ICG, Glencore, and others saw declines between 2% and 3.6%. Companies like Persimmon and Rio Tinto dropped between 1.4% and 2%.
On a brighter note, Melrose Industries surged by 7.7%, and Intertek Group rose approximately 3.3%. Stocks of Imperial Brands, Scottish Mortgage, and others gained between 1% and 2%. Notably, Halfords experienced a nearly 15% jump, with the retailer seeking increased governmental support to mitigate rising costs in light of the recent UK budget.
The German market painted a similar picture with Daimler Truck Holding dropping nearly 6% and Bayer falling by 4.8%. Other significant decliners included Volkswagen and Deutsche Bank. However, MTU Aero Engines gained around 2%, with Rheinmetall and Puma also seeing substantial gains.
In France, Stellantis suffered a nearly 5% drop, while ArcelorMittal was down by 3.7%. Financial giants like Credit Agricole and Societe Generale were among those witnessing declines. Kering saw a gain of about 1.3%, while LVMH and Thales recorded modest gains.
From an economic perspective, Germany’s business sentiment for November showed a downturn, as reported by the ifo Institute. The business climate index declined to 85.7, falling from October’s 86.5, and marking the lowest point in current conditions since July 2020.
In the UK, data from the British Retail Consortium indicated a slowdown in the decline of shop prices in November, pointing towards increased price pressures on consumers. The shop price index dipped 0.6% annually, a less significant drop compared to October’s 0.8%. Meanwhile, the Confederation of British Industry's latest survey revealed that UK retailers foresee a downturn in sales next month, with future sentiment over the next three months reaching its lowest level since November 2022.
