Europe midday: Stoxx falls below 500 as pharma woes, Trump tariff threat on EU hits sentiment

European shares extended losses on Friday, with the benchmark Stoxx 600 slipping below the 500 mark after US President-elect Donald Trump threatened the European Union with tariffs, while pharma stocks were in focus with Novo Nordisk and Zealand Pharma tanking on disappointing test results.

The index was down 1.72% at 497.96 points, with all major bourses lower. In a social media post, the bellicose Trump said the EU must buy US oil and gas to make up for its "tremendous deficit" with America or be slapped with tariffs on exports to the world’s biggest economy.

US stocks gave up earlier gains to finish flat overnight, pausing after a huge sell-off the previous session, as investors continued to digest hawkish comments from the Federal Reserve and a barrage of economic data.

Traders will be preparing for a readout of the US personal consumption expenditure index for November – the Federal Reserve’s preferred inflation measure. Forecasts are for a 0.1 percentage point rise month on month to 2.9%.

“Getting to the 2% target is proving to be harder than expected and if inflation comes in north of consensus, that’s likely to set investor nerves further on edge,” said Hargreaves Lansdown analyst Derren Nathan.

“What’s more, the US government is on the verge of a shutdown as Congress and the now politically empowered Elon Musk struggle to reach agreement on the latest short-term funding deal, with less than 24 hours left to find a way forward to agree spending plans for all but essential Federal services.”

In economic news, China left benchmark lending rates unchanged at Friday’s monthly fixing, in line with expectations. The one-year loan prime rate (LPR) was held at 3.10% and the five-year at 3.60%.

In Germany, the annual change in wholesale prices unexpectedly turned positive in November for the first time in 17 months, according to data from the federal statistics office on Friday.

Producer prices were 0.1% higher than November 2023, following a 1.1% year-on-year drop in October. The consensus forecast was for a decline of 0.3%.

UK retail sales missed expectations in November, but borrowing figures came in better than expected, according to data released on Friday by the Office for National Statistics.

Retail sales ticked up 0.2%. This was an improvement on the 0.7% decline seen in October but was below analysts’ expectations of a 0.5% jump.

Meanwhile, UK government borrowing fell to £11.2bn in November, the lowest figure for the month in three years, according to official data released by the Office for National Statistics.

Public sector net borrowing - the difference between public sector spending and income - was £3.4bn lower than in the same month last year. Economists had predicted borrowing of £13.3bn.

In equity news, Novo Nordisk tanked as its experimental next-generation obesity drug CagriSema cut patients weight by less than expected.

Shares in Zealand Pharma slumped as the US Food and Drug Administration has declined to approve the Danish's drug company's bowel disease treatment and asked for an additional trial to confirm its safety and efficacy.

Reporting by Frank Prenesti for Sharecast.com