Both the STOXX 50 and the STOXX 600 fell 0.4% on Monday, marking their first decline in three sessions, as negative sentiment from the U.S. spilled into European markets following Moody’s downgrade of the U.S. credit rating and outlook.
European stocks lower on Monday
The move, which cited rising fiscal deficits and political uncertainty over debt ceiling negotiations, raised concerns about the global risk environment and led to a pullback in equities. Investors also remained cautious amid ongoing geopolitical tensions and high-level diplomatic events. Attention turned to the anticipated call between former U.S. President Donald Trump and Russian President Vladimir Putin, set to focus on the escalating situation in Ukraine and its broader security implications for Europe.
Meanwhile, European Union and UK officials announced a provisional agreement covering key post-Brexit cooperation areas, including defense and security coordination, fisheries, and youth mobility. The deal, if formalized during the upcoming EU–UK summit, would mark a thaw in relations and could pave the way for British defense firms to bid for EU-wide military procurement projects—an area previously restricted since Brexit.
Sector-wise, food & beverages and travel & leisure shares led gains, benefiting from renewed hopes for summer demand resilience and easing cost pressures. Diageo rose nearly 2% after the spirits giant reaffirmed its full-year outlook, even as it warned that recently implemented tariffs could cost the company up to $150 million annually. Travel names such as Lufthansa and InterContinental Hotels Group also posted moderate gains.
Downside factors
On the downside, oil & gas, technology, and banking sectors were under pressure. Energy stocks tracked a pullback in crude prices amid concerns over rising U.S. inventories. Technology shares saw mild profit-taking following last week’s rebound, while financials slipped in response to rising sovereign bond yields. Still, BNP Paribas bucked the trend, gaining 1.4% after it announced a €1.08 billion share buyback for 2025, signaling confidence in capital strength and earnings momentum.
Investors now await key Eurozone inflation data and updated ECB meeting minutes later in the week, which could offer clues about the central bank’s policy trajectory amid diverging views on the path for interest rates.
