European shares fall as travel stocks, trade uncertainties hurt

European shares fell on Friday, dragged by travel and leisure stocks after a mass power outage led to the closure of Britain's Heathrow Airport, while potential ramifications of brewing trade tensions kept investors risk-averse.

The pan-European STOXX 600 was down 0.8% as of 0930 GMT, with Europe's travel and leisure index down 2.1%.

Airlines companies came under pressure after a huge fire incident in London and a consequent mass power outage led to the closure of the world's fifth-busiest airport on Friday.

Shares of IAG fell 2.3%, Lufthansa slipped 2.1%, Ryanair declined 1.8% and easyJet shed 1.5%.

Basic resources index was also among the top decliners, losing 1.9%.

The European benchmark index was up about 0.4% for the week, following an uptick after Germany's lower house of Parliament on Tuesday passed a massive increase in government borrowing to revive growth and ramp up military spending.

Germany's upper house of parliament on Friday cleared the bill on borrowing rules and a 500-billion-euro ($542 billion) fund.

"Berlin has taken over a more proactive role in Europe again, so there could be more defence spending coming in from other EU countries and maybe also some spillover effects," said Jochen Stanzl, chief market analyst at CMC Markets.

However, concerns about weaker growth and higher inflation due to global trade uncertainties kept a lid on investors' risk appetite.

The U.S. Federal Reserve on Wednesday lowered its economic growth outlook for this year and raised inflation projections due to higher uncertainty from President Donald Trump's trade tariffs.

The Fed kept borrowing costs unchanged. The Bank of England on Thursday took a similar move, citing an uncertain growth outlook given escalating trade tensions between the U.S. and other global economies.

European Central Bank President Christine Lagarde warned on Thursday that a 25% tariff imposed by the U.S. would lower euro zone growth by about 0.3 percentage points in the first year, while retaliatory measures could increase this to about half a percentage point.

"Any additional hopes for economic recovery with the financial package, with the infrastructure and defence spending coming out of Germany is somehow dampened by those (Lagarde warnings)," CMC Markets' Stanzl added.

Trump's new reciprocal tariff rates are set to take effect on April 2.

In other stocks, Germany-based lubricant supplier Fuchs was the worst performer on STOXX 600, dropping 7.1%, with analysts pointing to its 2025 EBIT forecast, which slightly fell short of market expectations.

(Reporting by Nikhil Sharma; Editing by Janane Venkatraman and Shinjini Ganguli)