Europe stock markets fall after Trump doubles steel tariffs

Novo Nordisk shares rose 3% following reports that Hims & Hers will cut 4% of its workforce amid the end of FDA allowances for compounded weight loss drugs, easing competition for Wegovy. The FDA had previously permitted cheaper compounded versions due to drug shortages, but lifted the shortage declaration in February, requiring compounding pharmacies to cease sales by May 22. This development is viewed positively for Novo Nordisk, as it reduces the availability of alternative, compounded obesity treatments in the market.

Analysis

Novo Nordisk (NVO) shares experienced a 3% uplift, driven by reports of telehealth platform Hims & Hers (HIMS, ticker sentiment -0.6) initiating a 4% workforce reduction as the U.S. Food and Drug Administration's allowance for compounded copycat weight loss drugs, directly competing with Novo's Wegovy, concluded on May 22. This regulatory development, stemming from the FDA's February declaration ending the drug shortage, is anticipated to curtail competition from less expensive compounded alternatives, thereby strengthening Novo Nordisk's market share for Wegovy (NVO ticker sentiment +0.7). In the broader market, European equities displayed a predominantly negative and cautious opening; the Stoxx 600 index decreased by 0.18%, France's CAC 40 fell 0.43%, and Germany's DAX was down 0.22%. This cautious sentiment is largely attributed to escalating global trade tensions, highlighted by the U.S. President's announcement to double tariffs on steel imports to 50% and a worsening in U.S.-China trade dialogue, with China accusing the U.S. of violating the Geneva trade agreement. These trade frictions contributed to a depreciation of the U.S. dollar, evidenced by the British pound appreciating 0.7% to trade above $1.35 and the euro gaining 0.75% against the dollar. Commodity markets saw spot gold prices rise by approximately 1.5% to $3,337 an ounce, reaching a one-week high, as investors sought refuge in safe-haven assets amidst tariff uncertainties and the ongoing Russia-Ukraine conflict. Oil prices also registered gains, with ICE Brent Crude futures for August delivery trading 2.29% higher at $64.22 per barrel, notwithstanding OPEC+'s announcement of a 411,000 barrels per day supply increase for July, a rally possibly fueled by speculation that the supply increase could have been more substantial. The pharmaceutical sector witnessed significant M&A activity, with French group Sanofi (SNY, ticker sentiment +0.5) announcing the $9.1 billion acquisition of U.S.-based Blueprint Medicines (BPMC, ticker sentiment +0.8), a strategic move to bolster its portfolio in rare immunological diseases, notably with the drug Ayvakit/Ayvakyt. Sector-specific performance indicated auto stocks declining by 1.4% and risk-sensitive technology stocks dropping 1% due to tariff-related fears, while U.K. oil and gas stocks rose 0.57%, buoyed by higher oil prices.

Key Decisions for Investors

• Investors should assess the improved competitive landscape for Novo Nordisk's Wegovy, whose shares rose 3% following regulatory changes reducing competition from compounded drugs, potentially boosting future sales.
• Monitor heightened market volatility and sector-specific impacts, such as the 1.4% drop in auto stocks and 1% fall in tech stocks, stemming from escalating U.S. trade protectionism, including doubled steel tariffs and deteriorating U.S.-China trade relations, which are also weakening the U.S. dollar.
• Consider the increased demand for safe-haven assets like gold, which saw its price climb 1.5% to $3,337 an ounce, and evaluate the outlook for oil prices, which rose over 2% to $64.22 per barrel for Brent crude despite an OPEC+ supply increase.
• Factor in ongoing strategic M&A within the pharmaceutical sector, such as Sanofi's $9.1 billion acquisition of Blueprint Medicines, as a potential catalyst for revaluing targets and acquirers in biotech and pharma.