LONDON (AP) — European markets closed lower Friday, with the pan-European Stoxx 600 falling 0.78% amid U.S. political turmoil and mixed signals from global central banks. The index recorded a 1.9% loss for the week.
The decline came as U.S. lawmakers failed to pass a Trump-backed spending bill Thursday evening, setting the stage for a partial government shutdown. The political uncertainty was compounded when President-elect Donald Trump threatened new tariffs on the European Union unless the bloc increased its purchases of U.S. oil and gas.
“Markets are reacting to multiple pressure points, from U.S. political instability to monetary policy shifts across major economies,” said Marcus Weber, chief market strategist at Deutsche Bank. “The uncertainty is driving investor caution.”
Central bank decisions worldwide added to market complexity. China maintained its key interest rates Friday, while Russia surprisingly held rates at 21% to combat inflation. The Bank of England’s decision to keep rates steady was overshadowed by internal disagreements and concerns about the new Labour government’s budget impact, pushing the British pound lower.
The Federal Reserve’s 25-basis-point rate cut Wednesday provided some positive momentum, but it wasn’t enough to offset broader market concerns. U.S. stocks initially dropped Friday but recovered following favorable inflation data.
In corporate news, Danish pharmaceutical giant Novo Nordisk saw its shares tumble 20% after releasing obesity drug trial results, contributing significantly to the market decline.
“The convergence of political uncertainty and monetary policy decisions has created a perfect storm for European markets,” said Sarah Martinez, market analyst at BNP Paribas. “Investors are particularly concerned about the potential impact of U.S. political gridlock on global trade.”
The market downturn affected almost all sectors, with healthcare and financial stocks among the hardest hit. Trading volumes remained high as investors repositioned portfolios ahead of the year-end holiday season.
Analysts expect market volatility to continue as the U.S. government shutdown looms and investors digest the implications of various central bank decisions.
