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European stocks fluctuated on the first trading session of 2025, as investor sentiment remained cautious following a late-year selloff driven by concerns over high valuations and potential policy shifts under incoming U.S. President Donald Trump.
The pan-European STOXX 600 index dipped 0.2% by 0946 GMT, erasing earlier gains as trading volumes were light, with many investors still returning from the New Year holidays.
Europe’s oil and gas sector gained 1% as crude prices edged higher, bolstered by a pledge from China’s President Xi Jinping to stimulate economic growth. As the world’s top crude importer, China’s growth outlook has significant implications for global oil demand.
However, banks and automakers led sectoral declines, each suffering losses of more than 1.5%.
Weak Economic Indicators Weigh on European Market Sentiment
The STOXX 600 had its worst quarterly drop in more than two years between October and December, primarily due to market uncertainty surrounding interest rates and the potential inflationary impact of policies under the incoming Trump administration. Despite this, the index posted a 6% gain in 2024, reflecting an overall positive year for European stocks.
In contrast, the U.S. market surged to new all-time highs, driven by optimism surrounding the adoption of AI and the Federal Reserve’s rate cuts. While the STOXX 600 also hit a record high last year, it underperformed the S&P 500, which saw a 23.3% rise. Europe’s growth prospects were tempered by a slowing economy and political instability, particularly in Germany and France.
Further contributing to investor caution, a survey indicated that euro zone manufacturers ended the year on a negative note, with factory activity declining at a faster rate. The HCOB final manufacturing Purchasing Managers’ Index (PMI) for the euro zone fell to 45.1 in December, slightly below expectations and further below the 50 threshold separating growth from contraction.
Global Economic Uncertainty Amplified by Trade Risks
Similar surveys from Asia also revealed a soft ending to 2024 for the continent’s major manufacturing hubs. As expectations for the New Year dimmed, concerns over trade risks—exacerbated by the incoming Trump presidency and China’s fragile economic recovery—loomed over global economic prospects.
Notable Stock Movements and Corporate News
Despite the broader market weakness, certain stocks showed resilience. Vestas Wind Systems (CSE:VWS) rose 3.7% after the Danish wind turbine maker announced new orders in Italy. Meanwhile, Sweden’s Intrum, Europe’s largest debt collector, surged 16% after a U.S. bankruptcy court confirmed its Chapter 11 restructuring plan.
As Europe enters 2025, the outlook remains shaped by concerns over economic growth, geopolitical uncertainty, and potential policy changes in both the U.S. and China.
