Europe midday: Stocks drop as tariff confusion hits risk appetite

(Sharecast News) - European stocks were following Asian and US markets lower on Friday as investors continued to digest the latest seesawing from Donald Trump on trade tariffs, as well as a batch of mixed economic data. The Stoxx 600 was down 0.8% by the midday point in Frankfurt, with heavy losses on the DAX (-1.6%) and CAC (-1.0%) in particular.

On Thursday, Trump delayed his proposed 25% tariffs on goods imported from Mexico and Canada that comply with the USMCA trade agreement, a day after he granted a one-month tariff reprieve for automakers. According to reports, that accounts for roughly half of Mexico's exports to the US, and 37% of Canada's. The suspension, which was announced a mere two days after the levies first came into force, will run until 2 April.

While it gives some reprieve to concerns of an impending trade war, the ongoing uncertainty caused by fluctuations in America's trade policy continues to erode risk appetite among investors. The S&P 500 dropped to a four-month low overnight, while Japan's Nikkei 225 fell to a six-month low.c

"The idea that you can repeatedly turn tariffs off and on without damaging economic activity has clearly run out of support, and businesses are likely to react by postponing investment until we have greater tariff clarity," said Joshua Mahony, chief market analyst at Scope Markets.

In other news, EU leaders were holding the second day of their summit in response to Trump's pivot away from war-torn Ukraine to its Russian invader and decision to withhold military aid and intelligence sharing. An initial communique pledged a rise in spending and relaxation of borrowing rules that could see €800bn ploughed into a new arms race as Washington redefines its relationship with Nato.

Markets were also digesting the latest economic data, which showed that German factory orders fell sharply in January. Orders fell a larger-than-expected 7% from the previous month, with the federal statistics office citing a "significant" decline in orders for machines and vehicles such as ships and aircraft.

Meanwhile, eurozone GDP expanded by 0.2% over the final three months of 2024, slowing from the 0.4% growth registered in the third quarter but ahead of the 0.1% expansion first reported last month. That was the second upwards revision to fourth-quarter data after figures released in January initially claimed that the euro area economy had stalled.

In corporate news, Elia Group surged 16% as the Belgian electricity generator and distributor released annual results and announced a €2.2bn equity package. The company beat forecasts with its 2024 figures and also impressed with its 2025 guidance.

Green energy companies were among Friday's biggest fallers, including Siemens Energy and Vestas Wind Systems, along with industrial peers Hochtief, Alstom and SFS Group.