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European markets retreated on Friday, with travel and leisure stocks leading losses following a major fire at Heathrow Airport. Broader market sentiment remained cautious as investors continued to assess the impact of escalating trade tensions and economic uncertainty.
STOXX 600 Falls as Travel Stocks Lead Declines
The pan-European STOXX 600 index slipped 0.5% as of 0815 GMT, with the travel and leisure sector down 2.1%—the worst-performing sector of the day.
Airline stocks faced heavy selling pressure after a massive fire forced Britain’s Heathrow Airport to shut down operations for the day. The disruption weighed on major European carriers:
- International Airlines Group (IAG) fell 3.1%
- Lufthansa declined 1.2%
- Air France-KLM lost 2%
- easyJet dropped 1.3%
Despite Friday’s downturn, the STOXX 600 remained up 0.7% for the week, primarily driven by strong gains in German equities.
Germany’s Fiscal Push Lifts Market Sentiment
Germany, Europe’s largest economy, played a key role in supporting markets this week. The country’s lower house of Parliament approved a new spending package designed to revive economic growth and increase military expenditure. Investors are closely watching the upper house vote scheduled for Friday, which could further shape market expectations.
Global Economic Uncertainty Dampens Risk Appetite
While Germany’s stimulus measures offered some relief, broader concerns over global economic conditions persisted. The Federal Reserve’s latest policy stance added to investor caution.
On Wednesday, the Fed:
- Lowered its U.S. economic growth forecast for 2025
- Raised its inflation projections
- Cited increased uncertainty stemming from U.S. President Donald Trump’s trade tariffs
Trump’s aggressive trade policies—including proposed reciprocal tariffs against major trading partners—have created uncertainty, raising concerns about slower global growth and inflationary pressures.
Stock-Specific Moves: Douglas Plunges on Profit Warning
In corporate news, German perfume and cosmetics retailer Douglas suffered a sharp 18.3% decline after the company lowered its full-year outlook. The downgrade amplified concerns about the consumer sector’s resilience amid a sluggish economic environment.
Market Outlook: Focus on Trade and Economic Policies
As investors navigate geopolitical and economic headwinds, markets will remain sensitive to trade developments, economic data, and policy shifts. Key factors to watch include:
- Germany’s upper house vote on fiscal stimulus
- Further clarity on U.S. trade tariffs
- Upcoming inflation and economic growth data from major economies
For now, European markets remain volatile, with sector-specific disruptions—like the Heathrow fire’s impact on travel stocks—adding to broader macroeconomic uncertainties.
