Written by Sruthi Shankar
(Reuters) – European stocks appeared on track for their worst quarterly performance in more than two years on Tuesday, as uncertainty over interest rates and Trump administration policies halted a rally that had pushed several markets to record levels this year.
The European index rose 0.1% in the last trading session of the year, but was on its way to a quarterly decline of 3.4%, the largest since July 2022.
Trading volumes were weak ahead of the New Year holiday, with stock exchanges in Germany, Italy and Switzerland already closed on Tuesday. Stocks in France, Spain and the UK were poised for an early close.
“The cautious mood is in line with global trends, as investors trim their positions ahead of the new year amid uncertainty over monetary policy and economic outlook under a Trump presidency,” said Matt Britzman, chief equity analyst at the bank. Hargreaves (Longitude:) Lansdowne.
High valuations, rising Treasury yields and doubts about 2025 have contributed to risk-off sentiment in the past few sessions on both sides of the Atlantic, but major US indexes have posted strong gains this year.
The index rose about 24% in 2024, while the STOXX 600 index rose only 5.4%, as the slowdown in the European and Chinese economies, the troubles of automakers, and political turmoil in France affected morale.
German stocks have outperformed broader European markets this year with a nearly 19% jump, while political instability and concerns about a widening fiscal deficit have pushed the index down 3% since the start of the year.
European stocks hit all-time highs in September, benefiting from an AI-driven rally on Wall Street as well as support from interest rate cuts from the European Central Bank.
The UK looks set to post a near 5% rise in 2024, the fourth consecutive year of gains.
On the sector side, banks and insurance companies led the rise this year, while food and beverage stocks and automakers underperformed.
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