European Markets Weaken on U.S. Tariff Threats
European stock markets slipped into negative territory as investors grappled with the growing prospect of renewed U.S. tariffs. The pan-European Stoxx 600 index declined by 0.5%, reflecting cautious sentiment. While the U.K.'s FTSE 100 held steady, France’s CAC 40 and Germany’s DAX fell by 0.8% and 0.6% respectively.
Earlier gains in U.K. stocks were pared after a Bank of England official advocated for faster interest rate cuts this year, adding to investor uncertainty.
Airline Sector: SAS Eyes Consolidation Boost from Air France-KLM
In airline news, SAS’s CEO emphasized the need for further consolidation in the European market amid capital and margin pressures. Following Air France-KLM’s announcement to increase its stake in SAS to 60.5% from just under 20%, SAS’s leadership highlighted that scale remains critical in an industry marked by intense competition and rising costs.
“Consolidation continues to be the name of the game,” SAS CEO said, expressing optimism about the airline’s growth trajectory within the Air France-KLM group. SAS recently emerged from U.S. Chapter 11 bankruptcy protection, underscoring the challenges facing European carriers.
French Cognac Producers Face Challenges After China’s Anti-Dumping Ruling
French spirits producers saw volatile trading following China’s anti-dumping investigation decision targeting EU brandy exports. Pernod Ricard shares fluctuated and settled down 0.9%, while Rémy Cointreau slipped 1.7%.
China’s Ministry of Commerce ruled that EU producers engaged in dumping, imposing retaliatory tariffs up to 34.9% for five years starting July 5. However, companies adhering to minimum price commitments may be exempted from duties, potentially softening the impact.
Experts noted that although the tariffs seem significant, existing pricing agreements with Chinese authorities could limit economic fallout. Still, the ruling signals a more challenging environment for European spirits in a key export market.
German Factory Orders Fall Sharply in May
Germany’s factory orders dropped unexpectedly by 1.4% month-over-month in May, sharply contrasting with analysts’ projected 0.1% decline. This downturn was mainly driven by a steep 17.7% fall in orders for computer, electronic, and optical products, coming after a surge in large April orders.
On a yearly basis, orders were still up 5.3%, but the monthly decline points to potential softness in industrial demand.
Stocks Open Lower Amid Geopolitical and Trade Tensions
European equities started Friday on a downbeat note, with the Stoxx 600 slipping by 0.4%, the FTSE 100 down 0.32%, the DAX declining 0.29%, and the CAC 40 retreating 0.72%.
The market mood was influenced by ongoing uncertainty surrounding U.S. President Donald Trump’s upcoming tariff negotiations, with tariffs expected to be sent to around a dozen trading partners imminently. Treasury officials anticipate roughly 100 countries will face a 10% reciprocal tariff. Despite the EU inching closer to a trade framework, a comprehensive deal before the July 9 deadline appears improbable, fueling investor caution.
