European markets slip as banking stocks shed over 2%; Sterling, euro slip on strong dollar

European markets dipped slightly lower Thursday, following an initially positive start to 2025 trading.

The pan-European Stoxx 600 index reversed earlier gains to trade 0.3% lower by 11:18 a.m. London time as regional bourses reopened after the New Year’s Day holiday.

Banking stocks led losses, shedding over 2%, while autos also fell 1.8%. Oil and gas stocks, meanwhile, ticked higher, adding 1%, as utilities also rose 0.84%.

Shares of Spain’s BBVA and Banco Santander were among the biggest losers in the banking stocks sell-off, falling more than 4%. Italy’s Unicredit traded around 3% lower.

Major regional bourses also slipped into the red by mid-morning, with France’s CAC 40 losing 1.2%. President Emmanuel Macron appeared to admit on Tuesday that his decision to hold snap parliamentary elections last year caused problems for the country.

“We are also faced with political instability, it is not specific to France, we also see it among our German friends who have just dissolved their Assembly. But it legitimately worries us,” Macron said in his New Year address. “I must admit tonight that the dissolution [of parliament] has brought, for the moment, more divisions to the Assembly than solutions for the French,” he added.

Elsewhere, Germany’s DAX dipped 0.3% Thursday and the U.K.’s FTSE 100 was hovering around the flatline.

It comes as manufacturing activity pulled back in December across Germany and France in a sign of continued woe for the euro zone’s two largest economies. The HCOB manufacturing purchasing managers index came in at 42.5 last month in Germany, down from 43.0 in November. Meanwhile in France, production volumes fell to 41.9, the sharpest fall since May 2020.

Manufacturing activity also slowed in Italy in December, the data showed, while Spain recorded a further month of expansion, as the southern European economy continues to gain steam.

In currency markets, both sterling and the euro plunged against a strengthening dollar. The British pound hit its lowest level against the greenback since April 2024, and was last down 0.61% at $1.2441 by 11:43 a.m. London time. The euro was down 0.31% to $1.0323, its lowest level since November 2022.

U.K. house prices rose 0.7% month-on-month in December, as activity remained unseasonably strong in the final month of the year, data from British lender Nationwide showed Thursday. Home prices increased 4.7% over the year, bringing them within touching distance of the all-time highs recorded in summer 2022.

Asian stocks traded mixed overnight, with China stocks leading losses as several major markets resumed trading after the New Year holiday.

U.S. stock futures were slightly higher as trading got underway for 2025. Traders hope that the market can regain the momentum that propelled it to log two straight years of annual gains above 20%.

— CNBC’s Christina Cheddar Berk and Sophie Kiderlin contributed to this market report