European shares end week higher; airlines hit by Heathrow closure

By Nikhil Sharma and Purvi Agarwal

(Reuters) -European shares fell alongside other major global stock markets on Friday on uncertainty over trade tensions and geopolitical conflicts, while travel and leisure stocks were hit after a fire led to the closure of Britain's Heathrow Airport.

The pan-European STOXX 600 was down 0.6% in a third consecutive session of declines.

Britain's Heathrow said flights would resume later on Friday after a fire knocked out its power supply and shut Europe's busiest airport for the day, hitting airline and travel stocks.

Shares of British Airways parent IAG fell 1.9%, Lufthansa was down 1.7% and Ryanair dropped 2.3%. The travel and leisure sector closed 1.6% lower.

"The full extent of the impact will depend on how quickly the airport reopens and whether this is a one-off incident. The near-term impact for airlines and businesses reliant on cargo is likely significant but temporary," said Sree Kochugovindan, senior research economist at aberdeen.

Basic resources miners were the biggest decliners, losing 2.6%, as copper prices retreated from multi-month highs, while industrials were down 1.5%.

The European benchmark index closed 0.5% higher on the week, after both houses of the German parliament passed reforms for a massive increase in government borrowing and a 500 billion euro ($542 billion) fund to revive the economy.

"Berlin has taken over a more proactive role in Europe again, so there could be more defence spending coming in from other EU countries and maybe also some spillover effects," said Jochen Stanzl, chief market analyst at CMC Markets.

However, concerns about weaker growth, higher inflation due to global trade uncertainties and the Russia-Ukraine conflict kept a lid on risk appetite.

Major central banks have flagged uncertain growth outlooks against the backdrop of U.S. President Donald Trump's fluctuating trade policy and escalating trade tensions. The Federal Reserve and the Bank of England kept rates on hold at their meetings this week.

European Central Bank President Christine Lagarde warned on Thursday that a 25% tariff imposed by the U.S. would lower euro zone growth by about 0.3 percentage points in the first year, while retaliatory measures could increase this to about half a percentage point.

Additional, reciprocal U.S. tariffs are expected from April 2.

Germany-based lubricant supplier Fuchs dropped 7.2% with analysts pointing to its 2025 EBIT forecast, which fell slightly short of market expectations.

(Reporting by Nikhil Sharma and Purvi Agarwal; Editing by Janane Venkatraman and Shinjini Ganguli, Kirsten Donovan)