European Shares Fall on Fears of Trump Tariffs

By Shashwat Chauhan and Shubham Batra

(Reuters) -European shares ended lower on Wednesday, following a broad rally earlier in the session, hurt by a drop in utilities shares on fears that U.S. President-elect Donald Trump could halt fresh approvals for offshore wind projects.

Trump, who recaptured the White House by securing more than the 270 Electoral College votes needed to win the presidency, had vowed during his election campaign to scrap offshore wind projects by executive order on his first day in office.

Shares of Oersted and Vestas fell 12.8% each, while the broader utilities sector was down 2.6%.

The pan-European STOXX 600 was down 0.5%, with all regional equity markets closing in the red and Spain’s IBEX logging most losses, down 2.9%.

“We see less upside for European equities under a Trump presidency,” equity strategists at UBS said in a note.

“Within European equities, we expect the market to focus on three key areas of policy from the new president-elect: potential trade tariffs, potential rollback of some green energy initiatives, and implications for Russia-Ukraine and European defense spending,” the note said.

German automakers such as Mercedes-Benz Group and BMW lost around 6.5% each on fears of potential import tariffs under Trump’s presidency. However, BMW later downplayed such fears.

The broader auto sector was down 2.3%.

Trump also vowed to impose a 10% tariff on imports from all countries if he won, and said the European Union would have to “pay a big price” for not buying enough American exports.

Most companies listed on the STOXX 600 garner only 40% of their revenues domestically, while a large chunk of them comes from the United States.

Popular “Trump Trades” – stocks which could benefit or come under pressure from a Trump presidency – were on the move on Wednesday, with the Wall Street’s main indexes soaring to record highs on anticipation of lower corporate taxes. [.N]

Trump is seen bullish for European defence stocks, given his warnings to scale back U.S. military support in the region and force NATO members to spend 2% or more of their GDP on defence.

An index of Europe’s aerospace and defence companies jumped 2.1% to a record high.

Among earnings-driven moves, Novo Nordisk added 0.6% after the weight-loss and diabetes drugmaker reported better-than-expected quarterly sales of its popular Wegovy weight-loss drug and narrowed its 2024 outlook.

Investors will now shift focus to the U.S. Federal Reserve and the Bank of England’s rate decisions expected later in the week.

(Reporting by Shashwat Chauhan in Bengaluru; Editing by Saumyadeb Chakrabarty, Sonia Cheema, Devika Syamnath and Gareth Jones)