European markets tumbled on Friday as renewed fears over credit risks in the U.S. banking sector rippled through global equities, sending European bank stocks sharply lower.
The Stoxx Europe 600 Banks Index slid 2.8%, leading regional losses. The pan-European Stoxx 600 was down 1.5% in early London trading, with all major bourses in negative territory. The FTSE 100 dropped 1.5%, Germany’s DAX and Italy’s FTSE MIB both fell over 2%, and France’s CAC 40 slipped 0.7%.
The sell-off followed a difficult session in the U.S., where shares of regional banks and investment firm Jefferies plunged amid mounting fears of credit exposure tied to underperforming loans. The news reignited investor anxiety over potential systemic risks within the financial sector.
In Spain, BBVA shares rose 5.7% after the bank ended its €16.32 billion ($19.1 billion) hostile takeover bid for Banco Sabadell, which slumped 6.1% following the announcement.
Meanwhile, defense stocks—which had outperformed most of 2025—fell sharply. The Stoxx Europe Aerospace and Defense Index was down over 3%, after reports that U.S. President Donald Trump and Russian President Vladimir Putin are expected to meet in Hungary to discuss the Ukraine conflict, dampening investor appetite for defense sector equities.
Automaker Volvo Group also weighed on sentiment. The Swedish manufacturer reported Q3 net profit of 11.7 billion SEK ($1.3 billion), beating forecasts but warning of “difficult market conditions” in North and South America. Its stock dropped 5.4% in early trading.
European investors are now turning their attention to inflation data and central bank policy signals. ECB Governing Council member Martin Kocher said in Washington this week that the European rate-easing cycle “is close to an end or at its end.”
In broader economic updates, the U.K. economy grew a modest 0.1% in August, according to official data, while Switzerland cut its 2026 GDP forecast to 0.9%, citing the drag from new U.S. tariffs.
Asian equities also mirrored the downbeat tone, though South Korea’s Kospi hit record highs amid ongoing U.S. trade talks, offering a rare bright spot in global markets.
