European Markets Hover Near Record Highs, Euro Edges Higher After U.S. Debt Rating Downgrade

Bridgette Randall
19 May, 2025
London

Stock market indexes in Europe declined as investors reviewed a flood of economic releases from China, and trade tensions rose after China slapped on new tariffs. 

Benchmark indexes in Frankfurt, Paris, Milan, and London turned lower, bond yields inched higher, and the euro and the pound strengthened. 

U.S. debt level and the persistent widening federal government budget deficits were in focus after Moody's Ratings lowered its credit rating on the U.S. debt. 

Moody's lowered its rating by one notch to Aa1 from its top rating of Aaa, citing deteriorating U.S. fiscal governance and the lack of near-term downward trajectory of U.S. budget deficits. 

Moody's is the last of the three major rating agencies to lower its U.S. debt rating, and S&P Global trimmed its rating in 2011, followed by Fitch Ratings in 2023.  

Separately, China slapped up to 75% tariffs on plastic imports from the U.S., EU, Taiwan, and Japan, confirming that trade tensions are far from settled. 

The new ruling imposes a 34.5% tariff on the EU plastic suppliers and places a 74.5% tariff on supplies from the U.S.  

 

Europe Indexes and Yields

The DAX index decreased by 0.1% to 23,746.22, the CAC-40 index edged lower 0.4% to 7,857.99, and the FTSE 100 index declined 0.4% to 8,647.86.

The yield on 10-year German bonds inched higher to 2.60%, French bonds increased to 3.28%, UK gilts moved up to 4.69%, and Italian bonds edged higher to 3.62%.

The euro increased to $1.12; the British pound was higher at $1.33; and the U.S. dollar was lower and traded at 83.38 Swiss cents.

Brent crude decreased $0.30 to $65.11 a barrel, and the Dutch TTF natural gas was lower by €0.24 to €34.90 per MWh.

 

Europe Movers

Diageo plc advanced 1.4% to 2,183.0 pence after the alcoholic beverage maker reaffirmed its annual outlook, and net sales in the fiscal third quarter ending in March increased 2.9%. 

The company estimated a tariff-related annual hit of £150 million if the current level of 10% U.S. tariffs remains in place on imports from the UK and the European Union. 

BNP Paribas gained 1.7% to €76.06, and the French bank announced the launch of a €1.08 billion stock buyback program for 2025.  

Ryanair Holdings plc  jumped 6.8% to €23.25 after the Ireland-based discount airline reported mixed financial results and a rise in passenger traffic.