European Markets Falter Amid Economic Uncertainty

European shares ended a holiday-shortened week lower, led by declines in luxury and spirits sectors. Concerns focus on economic data, potential U.S. policy shifts under Trump, and a trade war with China. European spirits fell after U.S. cancer warnings, while Tullow Oil surged on tax exemption.

European markets closed the week on a downbeat note, with luxury and spirits sectors at the forefront of losses. This downward trend comes as investors keep a vigilant eye on economic signals and impending policy changes under Donald Trump's presidency.

The STOXX 600 index ended 0.5% lower following a reduced trading week due to New Year celebrations. Sectors linked to China, like mining and luxury, faced additional stress despite announcements from Beijing promising increased ultra-long bond funding aimed at boosting business investments by 2025.

Economic uncertainties in Europe have aggravated investor sentiment, further widened by the threat of U.S. tariffs and political strife in Germany and France. While U.S. markets have benefitted from interest rate cuts and AI optimism, European gains remain constrained. The European Central Bank is expected to cut interest rates, aiming for fiscal relief in Germany.

(With inputs from agencies.)