European shares end lower as Trump’s tariff threat persists

European shares touched their lowest in nearly two weeks on Tuesday, as mounting unease over U.S. President Donald Trump's tariff threat over Greenland hurt optimism from earlier in the month.

The pan-European STOXX 600 ended 0.7% lower, marking its biggest two-day drop in two months. France's CAC 40 index dropped 0.6% to touch a one-month low, while Germany's DAX slipped 1%. 

Trump threatened to implement a wave of increasing tariffs from February 1 on eight European countries until the U.S. is allowed to buy Greenland, fuelling fears of a renewed trade war.

While some remain sceptical about the extent to which Trump will follow through on his threats, investors are on edge as the U.S. president has shown little sign of softening his rhetoric. 

"So markets have reacted but there's clearly room for bigger moves if the rhetoric increases further. Trump will likely continue to be active beforehand but remember he speaks at Davos tomorrow and this would be an ideal location for him to get his full views of the world across," said a group of analysts at Deutsche Bank led by Jim Reid.

Top policymakers from around the world have gathered in Davos, Switzerland this week for the WEF's annual meeting, which will be closely watched for signals on economic policy and the geopolitical outlook.

EARNINGS IN FOCUS

Corporate earnings and data are also expected to steer market sentiment in Europe this week. 

French automaker Renault Group's shares rose 2.2% after it said sales volumes rose 3.2% in 2025. Oil major TotalEnergies was up 1.4%, as the company said it expects lower oil and liquefied natural gas sales in the fourth quarter of 2025, but stronger margins on refining fuels.

Britain's Wise jumped 16% on robust third-quarter results, while Qiagen gained 12.4% after a report said it is considering strategic options amid fresh interest.

Sectors on the STOXX 600 were broadly in decline, led by real estate's 1.9% fall, pressured by the steepening of euro zone bond yields. [EUR/GVD]

Luxury group LVMH shares fell 2.2%. Trump threatened to slap a 200% tariff on French wines and champagne to push French President Emmanuel Macron to join his Board of Peace initiative.

Against this backdrop, Citi downgraded continental Europe to "neutral" for the first time in over a year, saying the latest step-up in transatlantic tensions and tariff uncertainty dented the near-term investment case for European equities.

(Reporting by Niket Nishant and Johann M Cherian in Bengaluru; Editing by Harikrishnan Nair, Devika Syamnath, William Maclean)