European shares fall on US tariff fears

European shares closed lower on Wednesday after a broad rally earlier in the session, dragged down by utilities shares on concerns that US President-elect Donald Trump could hold up new approvals for offshore wind projects.

Orsted and Vestas fell 12.8% and the broader utilities sector fell 2.6%.

The pan-European STOXX 600 index fell 0.5% with all major markets closing lower, with Spain’s IBEX the biggest loser, down 2.9%.

“We see less upside potential for European equities under a Trump presidency,” equity analysts at UBS said in a note.

Trump has also pledged to impose a 10% tariff on imports from all countries if he wins, and said the European Union would have to “pay a heavy price” for not buying enough US exports.

Most companies in the STOXX 600 earn only about 40% of their revenue domestically, with a significant portion coming from the United States.

Trading activity linked to Trump’s policies that could benefit or be pressured by his presidency was affected today as Wall Street’s main indexes rose to record highs on expectations of a corporate tax cut.

Trump has been seen as a catalyst for European defense stocks given his warnings about reducing U.S. military support in the region and his pressure on NATO members to spend 2% or more of their gross domestic product on defense.

“We see less upside potential for European stocks under a Trump presidency,” UBS equity analysts said in a note.

Most companies in the STOXX 600 earn only about 40% of their revenue domestically, with a significant portion coming from the United States.