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Healthcare stocks drop after Trump's drug price cut letters

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Aug 1 (Reuters) - European stocks logged their biggest one-day drop in over three months on Friday, at the end of a busy week as investors grappled with the repercussions of fresh U.S. levies on dozens of countries, including a 39% tariff on Switzerland.

Investors shunned riskier equities globally as Trump continued his tariff blitz, announcing steep levies on exports from dozens of trading partners including Canada, Brazil, India and Taiwan with countries not listed subject to a base 10% rate ahead of a Friday trade deal deadline.

Healthcare stocks lost 1% after U.S. President Donald Trump sent letters to the leaders of 17 major pharmaceutical companies, including Novo Nordisk and Sanofi, outlining how they should slash U.S. prescription drug prices.

The sector was already singed this week by Novo Nordisk's profit warning. The Denmark-listed Wegovy-maker shed 1.8% and logged its steepest weekly decline on record.

"We saw during the week that companies like Novo Nordisk had different issues. European pharma is very close to bottoming and that's why it didn't react to the uncertainty around tariffs and policy," Anthi Tsouvali, a multi-asset strategist at UBS Global Wealth Management said.

"Europe is an export market... if we see heightened tariffs all over the world and trade being subdued, then that will have an impact on European companies regardless."

The pan-European STOXX 600 index slid 1.9% and marked its biggest one-week drop since early April when Trump unveiled his tariffs on world economies. The euro STOXX volatility index jumped 4.25 points to its highest in over one-month.

The STOXX index has lost over 5% from its March peak, after coming within 2% of that level earlier this week, dragged down by a record plunge in Novo Nordisk shares, and as investors assess the implications of the U.S.-EU trade deal.

Markets in Switzerland were shut for a holiday, but UK-listed Watches of Switzerland declined 6.8%, while a U.S.-listed exchange traded fund tracking the country's equities slid to a more than three-month low and was last down 1.2%.

Most regional bourses were in the red, with Germany's blue-chip DAX down 2.7%, while Denmark's OMXC fell 1.8% to a nearly two-year low.

Banks, that had rallied earlier in the week, were down 3.4% and were the top sectoral underperformer as they notched their biggest one-day drop since early April.

Adding to the dour mood, U.S. data showed job growth slowed sharply in July, which boosted bets for an interest rate cut by the Federal Reserve next month, while traders also priced in a dovish move by the European Central Bank later this year.

In a bright spot, Italy's Campari was the top gainer on the STOXX 600 index, adding 7.9% after reporting an increase in second-quarter operating profit. (Reporting by Twesha Dikshit, Medha Singh and Johann M Cherian; Editing by Mrigank Dhaniwala, Shinjini Ganguli, Alexandra Hudson)