European equities opened the week on a cautious note on Monday, retreating as renewed political tensions in the United States unsettled global markets and sparked a sell-off in banking stocks.
The pan-European STOXX 600 index slipped 0.2 percent by 0807 GMT, reflecting subdued investor sentiment amid concerns over policy uncertainty in the world’s largest economy. Banking stocks bore the brunt of the losses, with the sector index down 1.1 percent, making it the worst-performing segment of the market in early trading.
Shares of major lenders came under notable pressure after U.S. President Donald Trump called for a one-year cap on credit card interest rates at 10 percent, a proposal that raised fears of tighter regulation and reduced profitability for financial institutions. Barclays fell sharply by 4.5 percent, touching its lowest level in nearly a month, while HSBC shares declined by about 1 percent.
Trump’s proposal, announced on Friday and set to begin on January 20, was not accompanied by specific implementation details, adding to market unease. Investors remain wary of how such a policy could affect banks’ earnings, particularly those with significant exposure to consumer lending.
Market jitters were further amplified by escalating tensions between the U.S. administration and Federal Reserve Chair Jerome Powell. Reports that officials allied to Trump had threatened to indict Powell over his comments to Congress regarding a Federal Reserve building renovation project prompted a flight to safe-haven assets. Powell has described the episode as an attempt to exert political pressure on monetary policy decisions, a development that has raised fresh concerns about the independence of the U.S. central bank.
Outside the banking sector, individual stocks posted mixed performances. Pharmaceutical giant AstraZeneca slipped nearly 1 percent after losing its place in the Nasdaq-100 index, a move that weighed on investor sentiment around the stock.
In contrast, French biotech firm Abivax surged 22.8 percent, emerging as one of the standout performers of the session. The rally followed comments by Chief Executive Officer Marc de Garidel in an interview with Bloomberg News, in which he said major pharmaceutical companies could not afford to overlook the potential of Abivax’s experimental drug for inflammatory bowel disease.
Overall, European markets remained on edge as investors assessed the potential fallout from U.S. political developments and their implications for global financial stability, with banking stocks particularly vulnerable to policy-driven headwinds.
WHAT YOU SHOULD KNOW
European stocks ended lower as rising U.S. political tensions and President Trump’s proposed cap on credit card interest rates rattled investor confidence, triggering a sharp sell-off in banking shares despite isolated gains in the biotech sector.
