European stock markets experienced a marked decline on Monday, driven by U.S. President Donald Trump's implementation of punitive tariffs on Canada, Mexico, and China. His subsequent threat to impose similar tariffs on the European Union and the UK accelerated a broad sell-off. The Trump administration enforced a 25% tariff on Canada and Mexico starting Saturday (February 1), with Canadian energy products and Chinese goods facing an additional 10% tariff effective Wednesday (February 5).
These measures have heightened fears of a trade war, casting a shadow over the global economic outlook. However, markets recouped some losses after President Trump agreed to delay the tariffs on Mexico, following negotiations with Mexican President Claudia Sheinbaum Pardo regarding troop deployment at the U.S.-Mexico border. This postponement, now set for March, alleviated some concerns about imminent tariffs on the EU.
In the UK market, losses were slightly less severe compared to Germany and France, largely because President Trump suggested that the UK might avoid tariffs despite existing trade misalignments. He expressed optimism about addressing the trade imbalance with Great Britain: "I think that one can be worked out."
Automobile, technology, luxury, and mining sectors bore significant losses. The pan-European Stoxx 600 index fell 0.87%. The UK’s FTSE 100 dropped 1.04%, Germany's DAX decreased by 1.4%, France's CAC 40 declined by 1.2%, and Switzerland's SMI slipped 0.4%. Other European markets, including Austria, Belgium, Denmark, Finland, Greece, Iceland, Ireland, the Netherlands, Norway, Poland, Portugal, Russia, Spain, Sweden, and Turkiye, also closed with varying degrees of losses.
In the UK, JD Sports Fashion declined by 4.7%. Companies such as Scottish Mortgage, Pershing Square Holdings, Croda International, Ashtead Group, Weir Group, HSBC Holdings, Associated British Foods, Standard Chartered, Alliance Trust, Witan, Antofagasta, Glencore, Barclays Group, and Next fell between 2% and 4%. Conversely, Coca-Cola, Vodafone Group, and Fresnillo posted gains of nearly 2%, and BT Group, Admiral Group, IAG, 3i Group, Imperial Brands, National Grid, BAE Systems, Airtel Africa, and Compass Group registered gains between 0.5% and 1.2%.
In Germany, notable decliners included Volkswagen, Siemens Energy, BASF, Porsche, Puma, Deutsche Bank, Mercedes-Benz, Daimler Truck Holding, Bayer, Siemens, Continental, Infineon, BMW, and Sartorius, with losses ranging from 2.5% to 4.5%. SAP, Deutsche Post, Siemens Healthineers, Brenntag, Commerzbank, Merck, and HeidelbergCement also concluded the day significantly lower. However, MTU Aero Engines, Rheinmetall, Deutsche Boerse, Deutsche Telekom, and Fresenius posted moderate gains.
In France, Stellantis saw a decline of about 4.4%. Kering, Saint Gobain, STMicroElectronics, Schneider Electric, Societe Generale, Legrand, Pernod Ricard, LVMH, Teleperformance, and BNP Paribas fell between 2% and 4%. On the upside, Vivendi rose by about 1.7%, with Thales, Eurofins Scientific, Carrefour, and Orange achieving modest gains.
Economically, eurozone inflation edged upward in January, driven by rising energy prices. However, the slight increase is unlikely to deter the European Central Bank from its easing path. Inflation in the eurozone rose to 2.5% in January, exceeding expectations of remaining at December's 2.4%, according to flash data from Eurostat. Core inflation, which excludes energy, food, alcohol, and tobacco, held steady at 2.7%.
Data from S&P Global showed a rise in Germany's manufacturing PMI to 45 points in January from December's 42.50 points. Meanwhile, France’s HCOB Manufacturing PMI was noted at 45 in January, slightly below preliminary projections of 45.3 but improved from 41.9 in December. The eurozone's manufacturing sector continued to contract, albeit at a slower pace in January, as final figures from S&P Global indicated.
The HCOB Manufacturing PMI climbed to an eight-month high of 46.6 in January, up from 45.1 in December and surpassing the flash estimate of 46.1. Although the reading remained below the critical 50.0 threshold, it indicated the mildest decline since May last year.
The S&P Global UK Manufacturing PMI registered 48.3 in January 2025, marginally above the preliminary estimate of 48.2 and an improvement from December's 11-month low of 47.0. Nevertheless, the index continues to reflect a sharp downturn in operational conditions, as manufacturing output contracted for the third consecutive month, largely due to persistently weak demand both domestically and abroad.
