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Europe Markets Extend Weekly Losses Amid Tariff Threats and Resurgent Inflation Worries

Bridgette Randall
21 Mar, 2025
London

Investors in Europe turned negative on the final trading day of the week and turned cautious amid rising trade tensions and the ongoing Russia-Ukraine conflict.

Benchmark indexes in Frankfurt, Paris, Milan, and London edged lower ahead of the U.S. tariffs on European shipments starting as early as April 2.

Investors worried that reciprocal tariffs will weigh on future growth in trade with the U.S., and the European Union's rearmament plan of nearly $800 billion could stoke demand for additional social spending in the region.

The Bank of Russia held its key lending rate steady at the record high of 21% and signaled that additional tightening may not be needed for the disinflation process.

Earlier in the week, central banks in the UK and Sweden held their benchmark rates steady, but Switzerland lowered its rate by 25 basis points to 0.25%.

The U.S. Federal Reserve also held its key lending rate range between 4.25% and 4.50%, and the Bank of Japan held its short-term lending rate at 0.5%.

For the week, the DAX 30 index declined 1.1%, the CAC 40 index dropped 0.2%, but the FTSE 100 index rose 0.2%.

Europe Indexes and Yields

The DAX index decreased by 0.8% to 22,804.72, the CAC-40 index edged lower 0.8% to 8,030.69, and the FTSE 100 index declined by 0.6% to 8,650.31.

The yield on 10-year German bonds inched lower to 2.75%, French bonds decreased to 3.45%, the UK gilts moved up to 4.66%, and Italian bonds edged lower to 3.81%.

The euro decreased to $1.08; the British pound was lower at $1.29; and the U.S. dollar was lower and traded at 88.15 Swiss cents.

Brent crude decreased $0.30 to $71.70 a barrel, and the Dutch TTF natural gas was higher by €0.06 to €42.92 per MWh.

Europe Movers

Airline stocks dropped after Heathrow Airport in London was closed because of a fire near an electric substation.

About 1,300 flights have been cancelled disrupting travel and affecting 145,000 passengers.

Lufthansa AG decreased 2.2% to €7.40, Air France KLM Group declined 1.3% to €9.62, and International Airlines Group, the parent company of British Air, dropped 1% to 287.60 pence.

Ferrexpo plc declined 7.2% to 66.02 pence on the worry that the company may face liquidity crisis.

Ukraine's tax authority has suspended the refund of the company's value-added tax worth 513 million hryvnia or $12.4 million.

Salzgitter AG declined 0.7% to €25.96, and the specialty steelmaker delivered a mixed financial performance in 2024.

Japan's Inflation Eases from 2-Year High but Stays Elevated, Nikkei 225 Extends Weekly Gains

Akira Ito
21 Mar, 2025
Tokyo

Benchmark indexes in Tokyo closed mixed as investors returned from a mid-week holiday and reacted to monetary policy decisions from major central banks.

The Nikkei 225 stock average closed down 0.2%, but the broader TOPIX advanced 0.3%, as investors reviewed the latest inflation data.

Consumer price inflation in February eased to 3.7% from a two-year high of 4% in the previous month, the Ministry of Internal Affairs and Communications reported Friday.

The pace of inflation slowed after the government resumed subsidies for electric prices.

Consumer price inflation excluding fresh food slowed to 3.0% from the 19-month high of 3.2% in January.

Despite the slight decline in inflation, prices rose faster than the BoJ's target rate of 2% for the 35th month in a row.

Moreover, the core rate of inflation, which excludes food and energy prices, rose 2.6%, the highest rate in a year.

The persistent shortage of skilled labor, falling yen, and inclement weather are driving prices of food and services higher and supporting the underlying inflation.

Investors in Tokyo reacted to monetary policy decisions released over the last two days.

The Federal Reserve, the Bank of England, and Sweden's Riksbank held rates steady, but the Swiss National Bank lowered its key lending rate by 25 basis points.

Moreover, China held its 3-year and 5-year loan prime rates unchanged, denting the expectations of a rate cut.

Fed Chair Jerome Powell suggested that the U.S. tariffs are likely to be "transitory" on overall inflation, but the central bank lowered its annual economic growth estimate to 1.7% from 2.1% released in December.

Japanese investors are hoping that the Bank of Japan is ready to hike rates after the policy meeting in June and may continue with additional hikes at a gradual pace over the next year till the rates are restrictive.

Japan Indexes and Stocks

The Nikkei 225 Stock Average declined 0.2% to 37,677.06, and the broader TOPIX rose 0.3% to 2,804.16.

For the week, the Nikkei 225 stocks average gained 2.2%, and the TOPIX rose 3.7%.

Japan Airlines Co. Ltd. rose 1.1% to ¥2,678.0, and the company retained its full-year profit and dividend outlook but lowered its revenue forecast to 1.84 trillion yen.

Mercari Inc. advanced 7.5% to ¥2,633.50, and the operator of the e-commerce platform extended this year's gains to 53%.

Shipping companies traded down amid worries of slowing shipment growth ahead of the U.S. tariffs on goods from Asia and the European Union.

Kawasaki Kisen Kaisha declined 1% to ¥2,172.0, Nippon Yusen fell 1% to ¥5,230.0, and Mitsui OSK Lines fell 0.5% to ¥5,483.0.