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European stock markets sank on Friday as investors digested the latest European Central Bank (ECB) rate reduction ahead of key U.S. employment data, amid persistent uncertainty over U.S. trade policies.
At 06:30 ET (11:30 GMT), the pan-European Stoxx 600 dropped 0.5%, Germany’s DAX fell 1.6%, France’s CAC 40 slipped 1.0%, and the UK’s FTSE 100 dipped 0.5%.
The ECB delivered its sixth rate cut since June on Thursday, noting that monetary policy is becoming less restrictive as inflation trends toward its 2% target. However, the central bank also lowered its growth forecast for 2025, citing global trade tension uncertainties. While further rate cuts appear possible, ECB President Christine Lagarde indicated that both a reduction or a pause are on the table. Nomura now expects the ECB to implement only one additional cut this year, having revised its earlier forecast from two cuts down from four, in light of potential fiscal easing in Germany.
Data released earlier on Friday revealed that German industrial orders in January fell by 7% from the previous month, following a significant increase in December driven by demand for aircraft, ships, trains, and military vehicles. In related news, political parties seeking to form Germany’s next government have agreed to overhaul state borrowing rules to boost defense spending and infrastructure investments.
Investors are also weighing U.S. trade policy developments, as President Donald Trump escalated tensions earlier this week by imposing 25% tariffs on Canadian and Mexican goods and raising tariffs on Chinese imports to 20%. Although Trump eased his stance by delaying the 25% tariffs on Mexico and Canada until April 2, the uncertainty continues to contribute to market volatility.
The focus now shifts to U.S. jobs data and a speech from Federal Reserve Chair Jerome Powell later in the session for further guidance on future monetary policy.
In the energy sector, oil prices rose on Friday despite broader weekly declines. At 06:30 ET (11:30 GMT), Brent futures increased 1.6% to $70.55 per barrel, and West Texas Intermediate futures climbed 1.5% to $67.37 per barrel. Nevertheless, both benchmarks are on track to finish the week down over 3% amid ongoing concerns over U.S. trade policies and the prospect of increased production by major oil producers.
