In a quiet session with many markets closed or operating on reduced hours for Christmas Eve, the pan-European STOXX 600 index gained 0.2%. Most European exchanges will be shut for the next two days, further dampening trading activity.
As investors turn their focus to the upcoming year, attention is turning to U.S. President-elect Donald Trump’s January 20 inauguration. Trump’s threats of imposing import tariffs on key economies, including China and Mexico, have raised concerns. His expected policies are seen as inflationary and have already been reflected in the Federal Reserve’s monetary policy outlook. The European Central Bank, which has already implemented back-to-back rate cuts this year, has also flagged potential trade tensions with the U.S. under the incoming administration.
Morgan Stanley analysts offered a relatively optimistic outlook for Germany, assuming limited new U.S. trade restrictions. Meanwhile, Spain, which is less dependent on trade than other euro area economies, is expected to continue outperforming its neighbors.
Despite hitting record highs in 2024, the STOXX 600 is up only around 5% year-to-date, with market momentum slowing due to factors including proposed U.S. trade policies, weaker Chinese consumer spending, geopolitical tensions, and a sluggish domestic economic backdrop.
Among the sectors, the auto industry is expected to be the worst hit by Trump’s proposed measures, while defense and banking stocks are poised to be the year’s top gainers. On Tuesday, Europe’s basic resources index, which includes major mining companies, rose 0.6%, while the energy sector gained 0.4%, reflecting higher oil prices.
In individual stocks, British homebuilder Vistry saw a sharp decline of 16.3% after issuing its third profit warning for fiscal 2024, citing delays in year-end transactions and completions.
In France, the CAC 40 index edged up by 0.1% as the country’s new government, led by Prime Minister François Bayrou, was unveiled. The government will aim to navigate the passage of the 2025 budget and avoid exacerbating the current crisis.
Meanwhile, Euronext reported technical issues affecting the calculation of closing prices for certain cash instruments and stated it would manually update the affected prices.
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