European stocks moved lower again on Tuesday, extending the steep declines seen in the previous session as worries persist over the economic fallout from potential new trade tariffs.
Germany’s DAX fell 1.1%, France’s CAC 40 slipped 0.6%, while the UK’s FTSE 100 declined 0.7%, reflecting broad-based weakness across the region.
Tariff threats cloud growth outlook
European markets came under heavy pressure on Monday after U.S. President Donald Trump threatened to escalate tariffs against several European allies unless the United States is allowed to acquire Greenland, an autonomous territory of Denmark.
The cautious mood was expected to persist on Tuesday as U.S. markets reopened following a holiday, with investors bracing for further downside amid rising geopolitical uncertainty.
Late on Monday, Trump said he plans to hold discussions on the issue with various officials during the World Economic Forum in Switzerland. However, he reiterated his firm stance on Greenland, calling it “imperative for national and world security,” and signaling little room for compromise.
European leaders have largely rejected these demands and are preparing potential countermeasures should the tariffs be implemented. An emergency meeting of EU leaders scheduled for Thursday has raised concerns that tensions could escalate into a broader transatlantic trade dispute.
Adding to the cautious tone, Citigroup downgraded European equities on Tuesday, citing increased uncertainty weighing on corporate earnings prospects.
UK wage slowdown strengthens rate-cut expectations
In the United Kingdom, fresh labor market data pointed to a softening economic backdrop. The unemployment rate held at an elevated 5.1% in the three months to November, matching the previous reading and marking the highest level since early 2021.
At the same time, wage growth excluding bonuses slowed to 4.5% year-on-year, down from 4.6% previously. The cooling labor market has reinforced expectations that the Bank of England could deliver further interest rate cuts as 2026 progresses. The central bank last reduced rates by 25 basis points to 3.75% in December and is due to meet again in early February.
Elsewhere, German producer prices declined broadly in line with forecasts in December, falling 2.5% from a year earlier, according to the country’s federal statistics office.
UK pharma stocks draw attention
In corporate news, British pharmaceutical heavyweight GSK announced a definitive agreement to acquire RAPT Therapeutics, a California-based clinical-stage biotech firm, for an equity value of around $2.2 billion.
Meanwhile, AstraZeneca said it plans to delist from Nasdaq and complete a direct listing of its ordinary shares and debt on the New York Stock Exchange, effective after market close on January 30.
Oil steadies after volatile trading
Oil prices traded higher on Tuesday following a turbulent previous session sparked by Trump’s tariff threats toward major European countries over Greenland.
Brent crude futures rose 1.6% to $64.99 a barrel, while U.S. West Texas Intermediate crude traded at $60.41 per barrel. Beyond geopolitical risks, investors are focused on the upcoming monthly report from the International Energy Agency, due on Wednesday.
The report is expected to provide fresh insight into global oil supply conditions, after the agency repeatedly warned of a potential supply surplus emerging in 2026. This follows a recent outlook from OPEC, which offered a more optimistic view on oil demand growth in 2026 and 2027.
