European shares hits a weekly decline as tariff worries persist

By Medha Singh and Nikhil Sharma

(Reuters) -European shares slid on Friday as fresh U.S. data amplified worries about higher inflation, ending a week where new tariff announcements from U.S. President Donald Trump kept investors away from risky assets.

The pan-European STOXX 600 index ended 0.7% lower and was down 1.4% for the week, its worst week since December 16.

A report showed the core U.S. Personal Consumption Expenditures index, the Federal Reserve's preferred gauge for prices, rose at a slightly faster monthly rate of 0.4%.

"We're seeing some risk-off sentiment in the market. Today it's been exacerbated by that stronger core PCE data, which weighed mostly on U.S. stocks, but also translated into European stocks as well," Daniela Hathorn, senior market analyst at Capital.com, said.

Europe's benchmark index retreated to two-week lows on Thursday after Trump announced 25% import tariffs on all imports of vehicles and foreign-made auto parts earlier, raising jitters ahead of an April 2 deadline on reciprocal tariffs on U.S. trading partners.

"Markets don't expect tariffs to be as bad and widespread as originally thought. It is still going to affect growth in the near future," Hathorn added.

Still, the STOXX 600 index is set for its strongest quarterly performance in two years on Germany's spending plans and a rotation out of U.S. stocks.

Data showed Germany's unemployment rose in March at the fastest rate since October 2024, as an economic malaise puts pressure on the job market even against a backdrop of long-term labour shortages.

The country's benchmark index dropped 1%.

Inflation in March came in far below forecasts in two of the euro zone's largest economies, Spain and France, bolstering bets for another European Central Bank rate cut in April.

Short-dated yields came under pressure. German 2-year yield, more sensitive to the ECB policy rates, dropped 4 basis points to 2.027%, its lowest level since March 4.

The real estate stock which particularly benefits from lower interest rates, jumped 1.5% on the day. Utilities, often traded as a bond proxy, surged 1.6%.

In other company news, Deutsche Bank fell 2.9% as the bank extended CEO Christian Sewing's contract, while its deputy and another top executive will depart as part of a management revamp, cementing the leadership team of Germany's largest lender for the next phase of its turnaround.

Ubisoft's shares reversed gains to end 1.8% lower on Friday after rising as much as 12% earlier on plans to set up a subsidiary to house three of its popular video game franchises.

(Reporting by Medha Singh in Bengaluru; Editing by Mrigank Dhaniwala and Andrew Heavens)