Trump's Tariff Threat to the EU Shakes European Markets
European stocks extended their losses on Friday due to US President Donald Trump's tariff threats against the European Union and negative developments in the pharmaceutical sector. The Stoxx 600 index dropped below 500 points to 497.96. This decline was particularly highlighted by disappointing test results from pharmaceutical stocks, notably Novo Nordisk and Zealand Pharma.
Trump stated on social media that the European Union needs to purchase oil and gas from the US to balance the "massive trade deficit," otherwise tariffs would be imposed. Meanwhile, US markets showed little change and remained flat after a significant wave of selling earlier this week. Investors are continuing to assess the impacts of the Fed's hawkish remarks and economic data.
How is the market reacting to macroeconomic indicators? The personal consumption expenditures index for the US is expected to be in the spotlight for November, as it is the Fed's preferred measure of inflation. Expectations point towards a 0.1-point increase, reaching 2.9% on a monthly basis. Hargreaves Lansdown analyst Derren Nathan noted that reaching the 2% target is expected to be more challenging, and if inflation comes in above expectations, it could further heighten investor concerns.
In Germany, the annual change in wholesale goods prices recorded a positive figure for the first time in 17 months in November. According to Destatis data, producer prices increased by 0.1% compared to November 2023. This rise follows a 1.1% annual decline in October, which caught attention as economists had anticipated a 0.3% decrease. In the UK, however, November retail sales fell short of expectations, only showing a 0.2% increase.
Mixed outlook in European and Asian markets The UK stock market experienced a decline on Friday due to weak retail sales data. The increase in retail sales remained below the expected 0.5%, coming in at only 0.2%. Additionally, public borrowing fell to £11.2 billion in November, marking the lowest November figure in the last three years. French and German stock markets also experienced declines due to US-EU trade tensions and the looming threat of a government shutdown in the US.
Asian markets exhibited a mixed trend. In China, credit rates were held steady as expected, while the Shanghai Composite Index closed with a slight decline. In Japan, inflation reached a record level of 2.9% in November, leading to a drop in the Nikkei. South Korean and Australian markets also experienced declines, contributing to the overall negative sentiment in Asian equities.