European Markets Turn Lower Amid U.S. Fiscal Outlook Worries

Bridgette Randall
22 May, 2025
London

European markets faced renewed selling pressure amid a worsening U.S. fiscal debt outlook, a weakening dollar, and rising interest rates.

Benchmark indexes in Frankfurt, Paris, Milan, and London declined more than 0.6% as concerns over the U.S. fiscal debt rattled global markets. 

In overnight trading on Wall Street, the S&P 500 index and the Nasdaq Composite dropped more than 1%, the worst decline in over five weeks, amid deteriorating U.S. fiscal outlook, rising debt levels, and higher interest rates. 

Moreover, the yield on 30-year U.S. Treasury bonds advanced to 5.09% amid fears that the latest U.S. budget would add between $3 trillion and $5 trillion over the next 10 years. 

The U.S. fiscal debt in the current fiscal year ending in September is on track to surpass $38 trillion, or about 100% of gross domestic product, and the federal deficit is estimated to hover above 7% of GDP. 

Amid the "sell U.S. assets" narrative, investors are trimming exposures to U.S. stocks and bonds, and investors are shifting their allocation to European bonds. 

The U.S.'s safe-haven status has been tarnished since the launch of unilateral tariffs on all imports by the U.S. president. 

Moreover, Europe is attracting interest from global investors amid its issuance of debt to finance its infrastructure development and rearmament. 

Nations and corporations raised more than one trillion euros in the year to May 20; despite global trade tensions, investors appeared to be ready to finance Europe's debt boom. 

 

Europe Indexes and Yields

The DAX index decreased by 0.9% to 23,906.17, the CAC-40 index edged lower 0.9% to 7,839.96, and the FTSE 100 index declined 0.6% to 8,731.50.

The yield on 10-year German bonds inched higher to 2.66%, French bonds increased to 3.34%, UK gilts moved up to 4.78%, and Italian bonds edged higher to 3.67%.

The euro decreased to $1.13; the British pound was higher at $1.34; and the U.S. dollar was lower and traded at 82.48 Swiss cents.

Brent crude decreased $0.64 to $64.27 a barrel, and the Dutch TTF natural gas was higher by €0.54 to €37.06 per MWh.

 

Europe Stock Movers 

Assicurazioni Generali SpA rose 0.7% to €33.08 after Italy's largest insurance company reported better-than-expected profit in the first quarter.  

easyJet plc declined 3.5% to 545.20 pence after the discount airline reported wider-than-expected losses in the first half, but the company reiterated its annual outlook.