Stock markets in Europe experience largest daily decline since April, following increase in US tariffs
European Stocks Suffer Largest One-Day Drop in Over Three Months
European stocks experienced a significant setback on Friday, with the pan-European STOXX 600 index slipping 1.9%. This marked the largest one-day drop for the index in over three months, as uncertainty surrounding trade tariffs and economic growth weighed heavily on investor sentiment.
Most regional bourses were in the red, with Germany's DAX down 2.7% and Denmark's OMXC falling 1.8% to a nearly two-year low. The STOXX index has lost over 5% from its March peak, and the STOXX 600 index marked its biggest one-week drop since early April.
Banks, which had rallied earlier in the week, were the top sectoral underperformer, notching their biggest one-day drop since early April. They declined 3.4%, with the healthcare sector following closely behind, losing 1% due to U.S. President Donald Trump's letters to major pharmaceutical companies, including Novo Nordisk and Sanofi, outlining how they should slash U.S. prescription drug prices.
Novo Nordisk, the Wegovy-maker, shed 1.8% and logged its steepest weekly decline on record this week. The company's shares experienced a record plunge, contributing to the drop in the STOXX index.
The U.S. tariffs on EU exports, especially at a 15% rate, are increasing trade costs and creating uncertainty that weigh on the competitiveness of European industries. This negatively impacts healthcare-related stocks due to tariff and countermeasure risks on medical devices and related products.
In addition to these trade concerns, the euro STOXX volatility index jumped 4.25 points to its highest in over one-month. The jump in volatility was due to fresh U.S. levies on dozens of countries, including a 39% tariff on Switzerland. Trump announced steep levies on exports from countries like Canada, Brazil, India, and Taiwan.
Countries not listed are subject to a base 10% rate ahead of a Friday trade deal deadline. These tariffs have contributed to an elevated average effective tariff rate of about 18.3% for consumers in the U.S., causing a general 1.8% rise in consumer prices and corresponding income losses equivalent to roughly $2,400 per household in 2025 dollars.
Despite these challenges, Anthi Tsouvali, a multi-asset strategist at UBS Global Wealth Management, stated that European pharma is very close to bottoming and did not react to the uncertainty around tariffs and policy.
One bright spot in the otherwise gloomy market was Italy's Campari, which was the top gainer on the STOXX 600 index, adding 7.9% after reporting an increase in second-quarter operating profit.
As the trade situation continues to evolve, investors will be closely watching developments and their potential impact on the European stock market.
- The significant setback in European stocks could be attributed to the uncertainty surrounding trade tariffs and economic growth in the finance and business sectors, as well as the impact on investor sentiment.
- U.S. President Trump's letters to major pharmaceutical companies, including Novo Nordisk and Sanofi, have created tariff and countermeasure risks on medical devices and related products, affecting the healthcare and policy-and-legislation industry.
- Amidst these trade concerns and the evolving trade situation, politics and general-news will play a crucial role in shaping the future of the European stock market.
