Europe close: Stocks swing into the red as post-election euphoria fades

The post-election rally across European stock markets rapidly lost steam on Wednesday, with markets swinging sharply into the red as investors assessed what another Donald Trump presidency might mean for the global economy.

"Concerns about the inflationary knock-on effect of the fresh wave of tariffs promised by Trump are seeping through the markets," said Susannah Streeter, head of money and markets at Hargreaves Lansdown.

After rising as much as 1.9% in early deals, the Stoxx 600 finished 0.5% lower at 506.78, with all major markets registering losses, including a 1.5% decline on the FTSE MIB in Milan and a 2.9% drop on the IBEX 35 in Madrid.

Markets initially jumped across the continent as investor risk appetite returned following a bout of election-related uncertainty, with traders hoping that Trump's pro-business, employment and investment policies will support global equity markets.

However, while Wall Street indices held on to impressive gains – the Dow was up 3% just before midday in New York – optimism this side of the Atlantic quickly faded.

Analysts at Oxford Economics said they were upgrading their near-term global economic growth forecasts following the result, but that Trump's proposed import tariffs could hamper international trade, including with European countries.

"Targeted tariffs on China, the EU, Mexico, and Canada will eventually depress exports of the affected sectors to the US. But the impact on overall export volumes may be tempered by trade diversification and higher US demand thanks to much looser US fiscal policy. That said, the impact on different sectors could be large depending on the form of the new tariff regime," said Ben May, director of global macro research at Oxford Economics.

May also said that it was uncertain whether Trump's victory – in addition to potentially full Republican control of Congress – might increase the possibility of "more extreme policy measures, such as larger, less-targeted tariffs".

PMIs make headlines

In economic news, the Eurozone economy failed to gain ground in October, a closely-watched survey showed on Wednesday, weighed down by weakness in Germany and France. The latest seasonally-adjusted Eurozone composite PMI output index from Hamburg Commercial Bank was revised higher to 50.0, marginally ahead of September’s 49.6 and the initial estimate of 49.7.

Producer prices eased in the Eurozone in September, in line with expectations. According to first estimates from Eurostat, industrial producer prices fell 0.6% in both the Eurozone and wider bloc after growing by 0.6% in August.

Meanwhile, activity in the UK construction sector expanded for the eighth straight month in October, though growth eased from a two-year high as uncertainty delayed spending decisions ahead of the Autumn Budget. The S&P Global-CIPS construction PMI fell to 54.3 last month from 57.2 in September, missing the 56 consensus estimate.

Market movers

Companies with heavy exposure to the US market were performing well, such as London-listed equipment rental firm Ashtead, hotels group InterContinental and building materials provider CRH.

Wind-energy firms were falling sharply, including Oersted and Vestas Wind Systems, in the aftermath of the US election results. "Investors who thought Kamala Harris would win might have gone all-in on renewable energy stocks given her pro-green stance, and that trade is now unwinding," said Russ Mould, investment director at AJ Bell.

UK housebuilder Persimmon dropped 8% after reporting a slight dip in housing completions in the third quarter and warning that build cost inflation was picking up heading into 2025.

Danish pharma giant Novo Nordisk finished flat despite rising as much as 9% earlier on after reporting a 24% increase in third-quarter sales, helped by demand for its diabetes and obesity treatments.