Major bourses in Europe declined on Thursday, with both the STOXX 50 and STOXX 600 shedding nearly 0.5%, as renewed concerns over the US fiscal outlook rattled global market sentiment and spurred risk aversion.
European stocks trade lower on Thursday
Investor caution deepened ahead of a potentially pivotal vote on President Donald Trump’s contentious tax reform bill, which has faced resistance from key lawmakers. The proposed legislation, aimed at overhauling the tax code and offering broad corporate cuts, is projected to widen the US budget deficit by approximately $3 trillion over the next decade, according to independent estimates — far more than the administration's own projections. The mounting fiscal risks, combined with a recent credit downgrade from Moody’s, have unsettled investors worldwide and weighed on equity markets.
Back in Europe, market participants turned their attention to a fresh round of flash PMI data for May, offering new insights into the region’s economic health. In France, the data revealed a continued contraction in private sector activity, with the composite PMI remaining below the 50 threshold for the ninth straight month. This reinforced concerns that the eurozone's second-largest economy may be struggling to regain momentum, particularly in its services sector, which has been hit hard by weak demand and soft business sentiment.
Germany’s flash PMIs are also under scrutiny, as markets look for signs of divergence or confirmation of broader regional weakness. Any indication of sustained stagnation or decline across the eurozone could pressure the European Central Bank to reassess the pace and timing of future rate cuts.
Corporate news
On the corporate front, individual stock performances offered little relief. Shares of Italian insurance giant Generali fell 1.3% despite reporting stronger-than-expected quarterly profits, as investors appeared more focused on the company’s cautious guidance and ongoing macro headwinds. Budget airline easyJet also slipped 1.7% after it posted a larger-than-anticipated loss for the quarter, though management reiterated confidence in meeting full-year guidance, citing robust summer bookings and cost control efforts.
Energy and materials stocks were among the weakest performers, tracking lower commodity prices amid fresh concerns over global demand. Meanwhile, defensive sectors such as utilities and healthcare outperformed slightly, as investors rotated toward perceived safe havens.
Looking ahead, markets will be closely watching upcoming comments from European Central Bank officials and the release of the final PMI prints next week. The outcome of US fiscal negotiations, along with ongoing geopolitical tensions in the Middle East and upcoming European elections, will also remain key drivers of market direction in the near term.
