By Sruthi Shankar and Shashwat Chauhan
(Reuters) -European shares closed out a holiday-shortened week lower on Friday, with heavyweight luxury firms and spirits makers leading losses, though focus remained on economic data for clues on the interest rate path and potential changes in U.S. policies under a Donald Trump presidency.
The pan-European STOXX 600 index closed 0.5% lower in light trade after the New Year holidays.
China-exposed sectors such as miners, luxury stocks and automakers came under pressure even after a Beijing official said the country would sharply increase funding from ultra-long treasury bonds in 2025 to spur business investment and consumer-boosting initiatives.
Investors have been worried about China's economy and a looming trade war with the U.S. ahead of Trump's presidential inauguration on Jan. 20.
The French bourse, which houses most of Europe's top luxury names, fell 1.5% - its biggest single-day decline in more than seven weeks.
Separately, Milan-listed shares of Stellantis (NYSE:STLA) eased 3.5% after data showed vehicle production by the car maker in Italy fell by 37% last year and sales also fell in December.
European spirits makers and brewers sold off after the U.S. surgeon general called for cancer warnings on the labels of alcoholic drinks.
Italian spirits group Campari (LON:0ROY) dropped 5.2%, while Budweiser maker Anheuser-Busch InBev (EBR:ABI) shed 2.8%.
U.S. stock markets recorded a strong showing in 2024, helped by optimism around artificial intelligence and the Federal Reserve's interest rate cuts, while Europe in contrast recorded only marginal gains.
The STOXX 600 also hit record highs last year, although concerns about a slowing European economy, political turmoil in Germany and France and the threat of tariffs from the Trump administration kept gains in check.
"Uncertainty in Europe has worsened the situation and can help explain the valuation gap with the U.S.," economists at Goldman Sachs wrote in a note.
They recommended caution on companies exposed to tariffs and said they expected the market to price in a measure of German fiscal relief going forward.
ECB policymaker Yannis Stournaras said on Thursday he expected the bank's main interest rate to be cut to 2% by the autumn. That would mean another 100 basis points of easing this year, roughly in line with traders' expectations.
Federal labour office figures showed that the number of people out of work in Germany rose less than expected in December.
Among stocks, Tullow Oil (LON:TLW) jumped 8.1% after the West Africa-based company was exempted from a $320 million tax on its Ghana operations.