FRANKFURT: European stocks closed Thursday’s session at a one-week low, as investors took inventory of a mixed bag of corporate updates, while they were also on edge ahead of a German election that is likely to change the country’s political landscape.
The pan-European STOXX 600 index dipped 0.2%, with the defence sector leading the retreat with a 2.8% drop. The sector had gained over 4% earlier in the week on expectations of an increase in government borrowing to fund defence expenditures.
Quarterly reports were in full swing, with Airbus flagging short-term production challenges and confirming a delay in its A350 freighter, sending the planemaker’s shares down 2.3%.
Carmaker Mercedes-Benz slid 2.5% after forecasting a significant earnings decline in 2025, while Renault reported a record operating profit for 2024 but warned the EU’s new carbon emissions targets would pressure margins, sending its shares down 4%.
Germany’s main index lost 0.5%. Markets braced for a snap national election on February 23 following the collapse of Chancellor Olaf Scholz’s three-way coalition.
“Germany’s next government looks set to cut taxes and, if the parliamentary maths allow, reform the constitutional fiscal rule,” said Franziska Palmas, senior Europe economist at Capital Economics.
“A major surprise in the performance of the AfD could trigger a reaction in financial markets, given that this might change investors’ perceptions about the support for eurosceptic parties in Germany, and in turn in the rest of the EU.”
The STOXX index saw its biggest one-day drop of 2025 in the previous session as investors navigated trade war risks and uncertainty on the timeline of any Russia-Ukraine peace deal.
An uptick in eurozone bond yields have also pressured equities as investors price-in increased government borrowing to fund defence requirements.
Among others, Schneider Electric rose 3% as the electrical equipment giant predicted a profit margin for 2025 that exceeded expectations.
Repsol jumped 7.8% after the Spanish energy company promised to ramp up its dividend and buy back shares worth at least $729.8 million this year.
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