By Sruthi Shankar

(Reuters) – European shares are on course to post their worst week in three months on Friday, as comments by US President-elect Donald Trump about potential tariffs on the European Union stoked fears to investors already worried about the US rate outlook.

The pan-European index fell 1.1% to its lowest in nearly a month and was on course for its biggest weekly decline since early September.

Trump said the EU must buy US oil and gas to offset the “huge deficit” in the world’s largest economy, or face tariffs.

“There are more than 1 trillion euros of goods traded between the US and the EU every year, and with domestic demand flagging in many continental countries, any question mark about exports will shake the trust at its core,” said Derren Nathan, head of equity. research on Hargreaves (LON:) Lansdowne.

All major European subsectors declined, with banks, aerospace and defense and miners leading the losses, falling between 1.2% and 1.7%.

Germany and 40 fell more than 1% each, while Italy fell 1.3%.

“Investors are starting to price in the potential risk, but the President-elect’s comments now have their minds focused,” said Danni Hewson, head of financial analysis at AJ Bell.

The 100 posted a relatively small decline, down 0.7%. Data showed British retail sales rose a weaker-than-expected 0.2% in November, adding to signs of slowing economic momentum.

Investors await US inflation data later in the day for further clues on the pace of rate cuts next year.

European stocks fell on Thursday after the Federal Reserve projected smaller cuts in 2025 and higher inflation, halting a stunning rally in US and European stocks supported by hopes of easing monetary policy. .

The STOXX 600 is up 4.7% this year compared to a 23% surge in the US benchmark.

Idorsia (SIX:) fell 44%, and was on track for the deepest one-day decline on record, after the Swiss biopharma company said it was in exclusive talks for global rights to hypertension drug Tryvio stopped.

Zealand Pharma (NASDAQ: ) fell 9.7% to the bottom of the STOXX 600, after the US FDA refused to approve the Danish biotech group’s bowel disease drug.