By Nikhil Sharma
(Reuters) – European shares fell to a three-week low on Monday, extending losses after a week of extreme volatility due to heightened uncertainties around U.S. tariffs.
The pan-European STOXX 600 was down 0.3% as of 0940 GMT, after the benchmark index snapped a 10-session winning streak on Friday as frequent shifts in U.S. trade policy triggered a risk-off sentiment.
Investors remained concerned about an escalating global trade war and its potential impact on the U.S. economy, with doubts brewing over whether the world’s top economy could slip into a recession.
European banks led the declines by falling 1.8%, while the construction and materials index lost 1.4% to weigh heavily on the main index.
Defence stocks, which have lately benefitted from higher defence spending prospects, gave up their early gains to fall 0.3%.
European Union finance ministers were set to discuss how to pay for defence through new joint borrowing, existing EU funds and a greater role for the European Investment Bank.
German leaders agreed last week to overhaul state borrowing rules to boost defence spending and set aside 500 billion euros ($541 billion) for infrastructure investments over 10 years.
“The size of the packages that are being banded around will actually see the light of day… but I don’t think it necessarily will be of the scale that we saw last week,” said Jeremy Batstone-Carr, European strategist at Raymond James Investment Services.
“And that is what is causing investors to be a little bit more circumspect.”
Limiting overall losses, real estate and utilities gained about 0.8% each due to a slight fall in euro zone bond yields on Monday.
On the economic front, German industrial output rose in January but exports plunged, suggesting the outlook for the euro zone’s largest economy remains anything but rosy.
Investors looked ahead to Germany’s inflation figures later this week, a key reading that comes on the heels of a trade war with the U.S.
U.S. President Donald Trump had floated a 25% tariff on imports of cars and other goods from the European Union without providing much details about his plans.
Shares of Verallia rose 4% after Brazil’s Moreira Salles family said it would launch a takeover bid for all shares of the French bottler and confirmed it would pay 30 euros ($32.51) for each, valuing the company at 6.1 billion euros.
Carl Zeiss Meditec AG’s shares fell 4.3% after JP Morgan placed the German optical systems maker on a negative catalyst watch.
($1 = 0.9224 euros)
(Reporting by Nikhil Sharma; Editing by Mrigank Dhaniwala and Shailesh Kuber)
