Global Markets Dive as Trump Unleashes Tariff Storm
Stock markets across the UK and Europe experienced significant declines following President Donald Trump's weekend announcement of new tariffs, raising concerns about a potential global trade war. Investors reacted swiftly to the news, leading to what analysts are calling a 'Trump tariff tantrum.'
On Monday morning, Asian markets took an early hit, and European stocks followed suit. The UK's FTSE 100 index dropped 111 points, settling at 8562, pulling back from a record high reached just days earlier. Germany's DAX index opened with a 2% decline, while France's CAC 40 fell by 1.9%. Spain's IBEX dropped 1.7%, and Italy's FTSE MIB lost 1.4% in a broad sell-off.
The announcement included a 25% tariff on imports from Canada and Mexico, as well as a 10% tariff on Chinese goods. The fallout was particularly harsh for large European automakers; shares in Volkswagen, BMW, Porsche, Volvo Cars, Stellantis, and Daimler Truck each fell between 5% and 6%. The French parts supplier Valeo saw an 8% decline.
Richard Hunter, head of markets at the online investment platform Interactive Investor, expressed concern, stating that February is expected to start with heightened market volatility following Trump's announcement. Early futures prices suggested a drop of more than 600 points for the Dow Jones, along with declines of 2% or more for the benchmark S&P 500 and Nasdaq indices.
In the UK, almost all sectors were affected, particularly asset management firms such as Polar Capital, which fell by 4.5%, and mining companies like Antofagasta, along with investment trusts like Scottish Mortgage Investment Trust, all plunging over 3%. UK banks also faced losses, with Lloyds Banking Group retreating by 1.8%, NatWest down 1.9%, and HSBC slipping 1.4%. Additionally, Barclays, which was recently plagued by an IT glitch that locked customers out of accounts, fell 2.5%.
Asian markets were the first to react post-announcement, witnessing the Nikkei in Japan slump by 2.8%, while Hong Kong's Hang Seng index was down 1%. However, mainland Chinese markets remained closed for the Lunar New Year holiday until Wednesday, delaying further assessment of the tariffs' impact in the region.
Naeem Aslam, chief investment officer at Zaye Capital Markets, noted that investors are on high alert due to growing uncertainty regarding global trade dynamics and economic stability. The downturns in stock prices reflect investor anxiety surrounding tariffs' potential effects on the global economy, especially given how closely the European economies are tied to US trade policies.
Kathleen Brooks, research director at XTB, commented that while the UK economy will not be immune to the ramifications of these tariffs, it could exhibit greater resilience compared to other nations. However, she warned that while the exact consequences of the tariffs remain uncertain, there is a substantial risk that they could trigger inflation and severely hinder global growth, including within the US economy.
As the dust settles from this tumultuous start to February, the market remains on edge, and all eyes will be turned to the impacts of these tariffs on both local and international economies.
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