European stock markets closed largely lower on Tuesday, influenced by weak business sentiment in Germany, political uncertainties in both Germany and France, and cautious anticipation of the Federal Reserve's monetary policy announcement scheduled for later this week.
The pan-European Stoxx 600 concluded with a 0.42% decline. The UK's FTSE 100 dropped by 0.81%, Germany's DAX decreased by 0.33%, and France's CAC 40 marginally increased by 0.12%. Meanwhile, Switzerland's SMI advanced 0.33%.
Across other European markets, Austria, Belgium, Denmark, Finland, Greece, the Netherlands, Norway, Poland, Portugal, Russia, Spain, and Sweden ended on a weaker note. Iceland and Turkey posted gains, while Ireland remained flat.
In the UK market, Bunzl saw a 5.6% decline as the business supplies distributor warned that persistent deflation, especially in continental Europe, would slightly impact its annual profits. JD Sports Fashion, WPP, Coca-Cola, Diageo, BAE Systems, Marks & Spencer, Hiscox, 3i Group, Barclays, Lloyds Banking Group, B&M European Value Retail, and Intermediate Capital Group fell by 2 to 3%.
M&G, Imperial Brands, Howden Joinery, Informa, Kingfisher, Antofagasta, and Shell also experienced notable declines. Capita plunged 15% following an eight percent drop in revenue over the first 11 months.
Conversely, GSK, Haleon, Compass Group, Sage Group, Halma, and Taylor Wimpey achieved modest gains.
In Germany, Brenntag, E.ON, Sartorius, Deutsche Post, Rheinmetall, and Fresenius dropped between 2 to 3.6%, with Deutsche Bank closing nearly 2% lower. Fresenius Medical Care, RWE, and Bayer also ended in negative territory. However, Daimler Truck Holding gained approximately 2.5%, while Siemens, Symrise, BMW, and Infineon closed positively.
Within the French market, Vivendi slumped nearly 4%, and ArcelorMittal fell around 3%. Publicis Groupe, Saint-Gobain, TotalEnergies, Veolia, Teleperformance, and Societe Generale declined by 1 to 2%. Sanofi rose nearly 2%, with Hermes International, L'Oreal, Safran, LVMH, Dassault Systemes, STMicroElectronics, and Edenred recording increases between 0.4 to 1.3%. Airbus Group saw modest gains after Deutsche Bank upgraded its stock rating to "buy" from "hold".
In economic developments, the euro area trade surplus decreased to EUR 6.8 billion in October from EUR 9.4 billion a year earlier, according to Destatis. This reduction also fell short of September's EUR 11.6 billion surplus, reflecting declines in the surplus of chemicals, machinery, and vehicle products.
Meanwhile, the UK unemployment rate remained steady at 4.3% for the August to October period, per the Office for National Statistics. Wage growth outpaced expectations during the same timeframe, supporting arguments for a more gradual approach to interest rate reductions next year, as rising wages may fuel inflationary pressures. Excluding bonuses, annual earnings growth reached 5.2%, up from 4.9% in the preceding three months.
German business sentiment in December reached its lowest level since 2020, as companies expressed skepticism about the economic outlook amid looming trade tensions with the U.S. and domestic policy uncertainties, according to the ifo Institute. The ifo business climate index fell to 84.7 from 85.6 in November.
Unexpectedly, German economic sentiment rebounded in December, reaching its highest level in four months, as financial experts grew more optimistic following the announcement of snap elections in February and potential interest rate cuts from the European Central Bank, revealed a survey by think tank ZEW.
Forecasting shifts, Switzerland’s economy is anticipated to expand slightly less than previously estimated for the coming year amid global economic and trade policy uncertainties. The federal government’s expert group revised its GDP growth projection to 1.5% in 2025, down from the 1.6% forecasted in September.
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