European equities end lower as investors assess US data; defence firms tumble

Tue, 16th Dec 2025 17:11

Defence stocks fall as Ukraine peace talks progress

Falling oil prices pressure energy stocks, lift carriers

UBS gains after BofA Global Research upgrades rating

IG Group expects revenue growth around mid-point of 2026 outlook

Dec 16 (Reuters) - European shares dipped on Tuesday, led by sharp declines in defence and energy shares, with investors parsing disappointing domestic and U.S. jobs data.

The pan-European STOXX 600 fell 0.4% to 580.08, after marking its biggest one-day gain in close to three weeks on Monday.

Most major regional bourses were in the red with benchmark indexes in London and Germany shedding 0.6% each.

Germany's private sector growth decelerated for the second consecutive month in December, S&P Global's PMI data showed, while a flash estimate for France also showed a near halt in growth.

In the U.S., a labor department report showed jobs growth rebounded more than expected in November, but the unemployment rate was at 4.6%.

"With the U.S. government shutdown, (investors) are now trying to get to grips with the kind of slew of data that's coming out of the U.S. and trying to decipher what's noise and what's important," said Michael Field, European equity market strategist at Morningstar.

"Headlines as we're seeing today of unemployment at four-year highs in the U.S. certainly is enough to kind of scare investors."

Defence stocks slid after the U.S. offered to provide NATO-style security guarantees for Kyiv and European negotiators reported progress in talks on Monday to end Russia's war in Ukraine.

Rheinmetall fell 4.6%, Hensoldt was off 3.7%, Leonardo shed 4% and the broader index was down 1.8%, its biggest one-day decline in more than two weeks.

"Defence has been the rising star of this year ... however we could see that rally slow down into next year as most of the pricing of the new budget and the military spending have been already priced in," said Swissquote's senior market analyst Ipek Ozkardeskaya.

Consequently, energy stocks fell 1.9%, tracking lower oil prices, and carriers easyJet and Lufthansa gained 3.2% and 1.3% respectively.

Meanwhile, financial services were a bright spot, up 1.2%. UBS was 3.8% higher after BofA Global Research upgraded its stock to "buy" from "neutral".

London's IG Group added 8.5% as it expects to deliver revenue growth around the mid-point of its guided range next year.

Technology stocks weighed on the index, with heavyweights ASML down 2.4% and SAP off 1.4%, as valuation concerns continued to persist.

A host of central bank decisions, including ones from the European Central Bank, Sweden's Riksbank, the Bank of England, and Norway's Norges Bank will be in focus this week.

While analysts broadly expect the ECB to maintain current rates, questions persist regarding the possibility of a rate hike in 2026 especially after hawkish comments from ECB policymaker Isabel Schnabel last week.

Among others, Barry Callebaut gained 5.8% to the top of the Stoxx 600 after a Reuters report that the company was in early stages of exploring the separation of its global cocoa unit. (Reporting by Twesha Dikshit, Utkarsh Hathi, Ragini Mathur and Purvi Agarwal in Bengaluru; Editing by Mrigank Dhaniwala, Harikrishnan Nair)