LONDON — The market carnage triggered by Donald Trump's trade tariffs continued at full speed on Monday, following three consecutive days of steep losses, with no sign of the bleeding stopping.
European equity markets are experiencing their worst session since the outbreak of the COVID-19 pandemic in March 2020, as investors continue to flee from risky assets.
The Euro STOXX 50 fell 6% by 10:00 CEST, bringing its losses over the past three sessions to 14%. The broader STOXX 600 dropped 5.7%, extending its post-tariff announcement decline to 13%. The German DAX sank 7.2%, marking its most severe session since 12 March 2020, while Italy’s FTSE MIB fell 6.5% and Spain’s IBEX 35 lost 6%.
The sell-offs followed an equally dramatic rout in Asia. Hong Kong’s Hang Seng Index plummeted 13% overnight — its worst one-day drop since the 1997 handover — while Japan’s Nikkei fell 8.6% and Shanghai’s Composite dropped 7%.
US equity futures also pointed to a deepening downturn, with S&P 500 contracts down 3.8%, Dow Jones Industrial Average futures off 3.3%, and Nasdaq 100 futures sliding 4.2%.
“The collapse of US equities after President Donald Trump announced his new tariffs will be remembered in the history books, as it prompted the fourth-largest two-day drop in the S&P 500 since its inception in 1957,” BBVA said in a note to clients on Monday.
The sell-off was triggered by Trump’s latest protectionist measures, including a 34% tariff on Chinese imports, on top of an earlier 20% hike, and an additional 20% duty on goods from the European Union.
On his social media platform Truth Social, Trump defended the move, claiming it was a remedy for “massive financial deficits” and describing the tariff revenues as “a beautiful thing to behold”.
European policymakers reacted swiftly, with discussions underway on a coordinated retaliation.
“We have the necessary tools to respond,” Spain’s Economy Minister Carlos Cuerpo stated, reflecting a growing consensus for retaliation.
Compounding market stress, Federal Reserve Chair Jerome Powell warned on Friday that the economic fallout from the tariffs could be “significantly larger than expected”, potentially stoking inflation while slowing growth. He added that the Fed is not in a hurry to cut rates, further denting investor confidence.
European banks bore the brunt of the sell-off, with Banco Sabadell down 10%, Raiffeisen Bank International losing 9.2%, and ING Groep dropping 8.6%. Other sharp declines included Banco BPM (-7.7%), Commerzbank (-7.6%), CaixaBank (-7.1%), BPER Banca (-6.7%), and Intesa Sanpaolo (-6.3%).
The industrials sector also suffered heavy losses. Germany’s Rheinmetall AG plunged 15.3%, Safran dropped 10%, and MTU Aero Engines AG and Thyssenkrupp each fell 9.5%. HeidelbergCement, Leonardo SpA, Airbus, and Siemens Energy were all down between 8% and 9.2%.
Luxury and consumer goods firms, often sensitive to global trade disruptions, also declined. Kering fell 9.9%, Richemont 8.2%, and Burberry 7.8%. Salvatore Ferragamo, Hermès, Moncler, Adidas, Puma, and LVMH posted losses ranging from 6% to 12%.
As equities sank, traditional safe-haven assets attracted inflows. The Swiss franc rose over 1% against the US dollar, and the Japanese yen also strengthened. “Risk aversion dominates the currency market,” said Luca Cigognini, market analyst at Intesa Sanpaolo. The euro gained 0.5% to trade at $1.10, while the British pound struggled to hold ground.
Bond markets reflected the flight to safety. German Bund yields dropped 7 basis points, reversing the rise seen after Berlin’s recent fiscal stimulus announcement.
Commodity markets weren’t spared. Gold fell 0.5% to €2,754 per ounce, likely due to profit-taking after recent gains. Oil prices, meanwhile, extended their decline, with global crude benchmarks down 3.6% on Monday, pushing the three-day loss to 17% — the worst such stretch since March 2020.
With no signs of central bank intervention and geopolitical tensions escalating, markets are bracing for further volatility as economic and trade uncertainties deepen. — Euronews
