European shares were subdued on Monday as traders remained on the sidelines following last week's turbulence, while awaiting key earnings updates and the U.S. Federal Reserve's policy decision later this week.
The pan-European STOXX 600 (.STOXX) benchmark edged 0.2% lower by 0945 GMT. Travel and leisure stocks (.SXTP) dropped 1.3% and defence shares (.SXPARO) fell 1.2%.
The moves reflect lingering caution after the turmoil sparked by U.S. President Donald Trump's Greenland-linked tariff threats.
While the threat has been withdrawn, investors are debating the long-term implications for global trade if tariffs become a standard bargaining chip.
"I don't think that Europe is in a strong enough position to fight back because U.S. support is essential," said Jeremy Batstone-Carr, European strategist at Raymond James.
The Federal Reserve's policy decision later this week is also in focus. While the central bank is expected to hold interest rates steady, concerns about its independence will likely take centre stage.
"The focus will be on President Trump's imminent nomination for the new Fed Chair, the upcoming data, and whether that person can corral the rest of the committee into further cuts," economists at ING wrote in a note.
EARNINGS IN FOCUS
Investors will also sift through earnings updates from companies for clues on the market outlook.
"Risk assets tend to make headway early in a new year, but that can experience a reassessment once the data and the corporate earnings start to come through. That's probably the key vulnerability right now," Batstone-Carr said.
Shares of Ryanair (RYA.I) dipped 1.3% after it reported third-quarter results. French food and beverage maker Danone (DANO.PA) slipped 5.7% to its lowest in a year after it said it was recalling specific baby formula batches in targeted markets.
Automobile stocks (.SXAP) were marginally lower even as India plans to slash tariffs on cars imported from the EU to 40% from as high as 110%, Reuters reported.
Mining stocks (.SXPP) gained 0.7%, helped by gold prices surging past $5,000.
Separately, a survey showed German business morale in January remained unchanged from the previous month.
The DAX stock benchmark (.DAX), however, fell 0.4% and was set to snap a two-day winning streak.
