Europe: Shares end lower as trade war worries spike; automakers slide

European Shares Close Lower as Trade War Worries Escalate

European Stocks Decline

European shares closed lower on Friday (Feb 7), with automakers among top decliners as investors grew skittish on worries of a global trade war escalating. The pan-European Stoxx 600 index was down 0.4 per cent at 542.75 points, with the auto sector falling by 1.6 per cent.

Porsche’s Profit Warning

Porsche dropped 7.1 per cent, its biggest decline since listing on the stock market, after warning that the cost of new models and battery-related expenses would dent its 2025 profits.

US President’s Tariff Threat

Meanwhile, US President Donald Trump said he would announce reciprocal tariffs on many countries next week. Earlier this week, China imposed targeted surcharges on US imports in retaliation to Trump’s announced 10 per cent tariffs on all Chinese imports.

China-Exposed Luxury Stocks Decline

China-exposed luxury stocks declined 1.9 per cent.

Stoxx 600 Remains Positive

Still, the Stoxx 600 is up 0.5 per cent for the week, logging its seventh straight weekly advance as investors focused on positive quarterly corporate reports from the likes of ArcelorMittal, Novo Nordisk, and Infineon.

Fed and ECB Policies

On the policy front, traders priced-in the likelihood that the US Federal Reserve will leave interest rates unchanged at least until June after US data reflected a robust employment market. The European Central Bank (ECB) said that the euro area neutral level for the deposit rate, which neither stimulates nor restricts growth, was seen at between 1.75 per cent and 2.25 per cent.

Mergers and Acquisitions

In mergers and acquisitions news, Italy’s fourth-largest bank BPER fell 7.5 per cent to the Stoxx’s bottom after it announced a $4.5 billion all-share bid for smaller peer Banca Popolare di Sondrio. Popolare di Sondrio’s shares were up 5.4 per cent.

L’Oreal and Pernod Ricard

L’Oreal lost 3.5 per cent after the French cosmetics group reported its slowest quarterly rise in growth since the height of the pandemic, missing expectations. Pernod Ricard dropped 4.7 per cent. A report said the beverage maker is exploring a sale of its champagne brand GH Mumm.

Construction and Materials Sector

Construction and materials was the top sectoral winner, adding 0.5 per cent, as Sweco rose 7 per cent following its fourth-quarter results. Danske Bank added 7.8 per cent after posting record annual profits. Iveco Group soared 21.5 per cent and was the top gainer on the Stoxx 600 after the truck and bus maker said it was considering spinning off its defence unit.

Conclusion

European stocks closed lower on Friday as trade war worries escalated, with automakers and luxury goods companies among the top decliners. Despite this, the Stoxx 600 remains positive, driven by positive quarterly corporate reports and moderate interest rate expectations.

FAQs

Q: What was the impact of the trade war on European stocks?
A: European shares closed lower on Friday, with automakers and luxury goods companies among the top decliners.

Q: Which companies were among the top decliners?
A: Porsche, L’Oreal, and Pernod Ricard were among the top decliners.

Q: What was the impact of the US Federal Reserve’s interest rate policy on European stocks?
A: Traders priced-in the likelihood that the US Federal Reserve will leave interest rates unchanged at least until June, which supported the Stoxx 600.