Europe’s main stock index opened higher on Tuesday, with travel and leisure stocks, along with energy stocks, leading the way amid light trading volumes as investors entered the holiday-thinned period before Christmas.
The pan-European STOXX 600 was up 0.2% by 0855 GMT, as most European markets closed early or were shut for Christmas Eve. Many of these markets will remain closed for the next two days, with Amsterdam, Brussels, and Paris operating half-day trading sessions, while Frankfurt and Milan were closed.
Holiday Trading Trends:
The subdued trading activity is due to the proximity of the holiday season, and traders are adjusting their positions while awaiting further developments as the year draws to a close. The focus is on the impact of U.S. President-elect Donald Trump’s inauguration on January 20, 2025, and how his proposed policies could influence global markets. Trump has made it clear that he intends to impose import tariffs on key economies, including China and Mexico, potentially sparking inflationary pressures.
Investors are anticipating that Trump’s policies may lead to trade tensions, which could further impact economic growth. These factors have been factored into the Federal Reserve’s monetary policy outlook, while the European Central Bank (ECB) has already implemented back-to-back rate cuts this year to address concerns over the global economic slowdown.
Sector Performance:
The STOXX 600 index, which tracks large companies across Europe, is up approximately 5% so far in 2024, but momentum has slowed in recent months. This is due to factors including geopolitical tensions, weak Chinese demand, and a sluggish domestic economy. Among the sectors, automobiles are expected to be the biggest laggards, especially due to the potential fallout from Trump’s trade policies. Conversely, defence and banking stocks have been performing well and are set to close the year as the biggest gainers.
Travel and Leisure: The sector gained 0.5% on Tuesday, recovering from a 2% drop the previous day, benefiting from stronger market sentiment following a recent decline.
Energy: Up by 0.5%, energy stocks saw positive movement, in line with rising oil prices.
Notable Stock Moves:
Vistry Group: The British homebuilder saw its shares plummet by 18%, dragging it to the bottom of the STOXX 600. The sharp decline followed a profit warning for its fiscal 2024 results, citing delays in expected year-end transactions and project completions.
French Government Developments:
In France, the newly announced government under Prime Minister François Bayrou is aiming to pass the 2025 budget and mitigate any potential crisis. The CAC 40 index, which tracks French companies, rose 0.4% following the announcement.
The European stock market showed resilience in the face of lighter holiday trading, with travel, leisure, and energy sectors leading the way. However, uncertainties around global trade dynamics, particularly the policies of the incoming U.S. administration, continue to cast a shadow over broader market expectations as 2024 draws to a close. Investors will closely watch the developments in these areas in the coming weeks as they assess their strategies for the new year.
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