Published by Global Banking and Finance Review
Posted on February 7, 2025
By Nikhil Sharma and Johann M Cherian
(Reuters) - European shares closed lower on Friday, with automakers among top decliners as investors grew skittish on worries of a global trade war escalating, while a bleak profit margin forecast from luxury carmaker Porsche further added to the unease.
The pan-European STOXX 600 index was down 0.4%, with the auto sector falling by 1.6%.
Porsche AG dropped 7.1%, its biggest decline since listing on the stock market, after warning that the cost of new models and battery-related expenses would dent its 2025 profits.
Meanwhile, U.S. President Donald Trump said on Friday said he would announce reciprocal tariffs on many countries next week.
Earlier this week, China imposed targeted surcharges on U.S. imports in retaliation to Trump announced sweeping 10% tariffs on all Chinese imports.
China-exposed luxury stocks declined 1.9%.
Still, the STOXX 600 is up 0.5% for the week, logging its seventh straight weekly advance as investors focused on positive quarterly corporate reports from the likes of ArcelorMittal <MT.AS>, Novo Nordisk <NOVOb.CO> and Infineon <IFXGn.DE>.
On the policy front, traders priced-in the likelihood that the U.S. Federal Reserve will leave interest rates unchanged at least until June after U.S. data reflected a robust employment market.
Meanwhile, the European Central Bank said that the euro area neutral level for the deposit rate, which neither stimulates nor restricts growth, was seen at between 1.75% and 2.25%.
"If growth continues to disappoint and inflation remains under control, the ECB's next major research focus will need to be on what an accommodative, rather than neutral, monetary policy stance would look like," Carsten Brzeski, global head of macro at ING Research said in a note.
In M&A news, Italy's fourth-largest bank BPER <EMII.MI> fell 7.5% to the STOXX's bottom after it announced a $4.46 billion all-share bid for smaller peer Banca Popolare di Sondrio <BPSI.MI>. Popolare di Sondrio's shares were up 5.4%.
L'Oreal lost 3.5% after the French cosmetics group reported its slowest quarterly rise in growth since the height of the pandemic, missing expectations.
Pernod Ricard <PERP.PA> dropped 4.7%. A report said the beverage maker is exploring a sale of its champagne brand G.H. Mumm.
Construction and materials was the top sectoral winner, adding 0.5%, as Sweco rose 7% following its fourth-quarter results.
Danske Bank added 7.8% after posting record annual profits.
Iveco Group soared 21.5% and was the top gainer on the STOXX 600 after the truck and bus maker said it was considering spinning off of its defence unit.
(Reporting by Nikhil Sharma and Johann M Cherian; Editing by Sonia Cheema and Alison Williams)
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