European shares tumbled to 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 (.STOXX) fell 1.3% by 0925 GMT, days after hitting a record high. France's CAC 40 index (.FCHI) dropped 1.2% to a one-month low, while Germany's DAX (.GDAXI) slipped 1.4%.
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.
"This is the most unusual and potentially serious shift in USA foreign policy we've seen. There's no playbook for this," analysts at TD Cowen wrote in a note.
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.
"This comes at a tricky time as the world's movers and shakers gather in Davos for the latest World Economic Forum," said David Morrison, senior market analyst at Trade Nation.
Top policymakers from around the world have gathered in Davos this week for the WEF's annual meeting, which will be closely watched for signals on economic policy and the geopolitical outlook.
Separately, the U.S. Supreme Court is set to issue its next rulings on Tuesday, as several major cases remain pending, including the legality of Trump's tariffs.
EARNINGS IN FOCUS
Corporate earnings and data are also expected to steer market sentiment in Europe this week.
French automaker Renault Group's (RENA.PA) shares rose 1.2% after it said sales volumes rose 3.2% in 2025. Oil major TotalEnergies (TTEF.PA) was up 0.3%, 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.
Separately, data showed that Britain's jobs market weakened in the run-up to November's budget announcement. London's blue-chip FTSE 100 (.FTSE) fell 1.3%.
"But there are a few positives to latch onto, the first being that slowing wage growth provides a more benign backdrop for Bank of England rate setters worried about how sticky inflation might continue to be throughout the year," said Danni Hewson, head of financial analysis at AJ Bell.
Luxury group LVMH (LVMH.PA) 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.
