European stock markets tumbled after China retaliated with significant tariffs, just days after US President Donald Trump introduced broad new levies, heightening worries about a potential global recession fueled by the ongoing trade dispute, reports RTE.
In Paris, the CAC index fell more than 4% to close at 7,274. Frankfurt’s DAX dropped nearly 5% to finish at 20,641, while London’s FTSE saw its steepest decline since the beginning of the Covid-19 pandemic, ending the day down almost 5% at 8,054.
Ireland’s ISEQ index also suffered, sliding 5.4% to end at 9,629, reports RTE.
The imposition of a 20% effective tariff on Europe by the US this week led traders to increase their expectations for interest rate cuts by the European Central Bank, in an effort to support the region’s slowing growth.
Every major European sector ended the day in the red, with banking stocks hit hardest—falling 8.4% and closing out their worst week in three years, reports RTE.
Luxury companies, many of which are dependent on Chinese demand, also declined. Shares in France’s LVMH slipped 2.4%, while Gucci’s parent company, Kering, dropped 3.8%.
Meanwhile, US stocks slumped again, with Wall Street posting its second consecutive day of steep losses. The Nasdaq is now on the verge of entering bear market territory, reports RTE.
The Nasdaq Composite dropped 4.07%, putting it 20% below its record close in December. A close below that threshold would officially signal a bear market.
Both the S&P 500 and the Nasdaq were on track for their worst weekly performance since March 2020, while the Dow Jones was headed for its largest weekly fall since October 2020, reports RTE.
“Recession risk is a significant concern here. Tariffs could wipe out growth and markets are reflecting that. This bull market picture that we had in front of us is now being completely rewritten,” said Dana D’Auria, co-chief investment officer at Envestnet.
In recent weeks, investors have pulled out of riskier assets like equities and commodities, fearing that the tariffs could trigger an economic downturn. As a result, they’ve moved toward safer investments such as gold and government bonds, reports RTE.
Federal Reserve Chair Jerome Powell warned that the unexpectedly aggressive tariffs introduced by President Trump could drive inflation higher and slow economic growth, making things more difficult for the Fed.
Market participants continued to expect more dovish action from the US central bank, with futures now pricing in rate cuts totaling 100 basis points by year-end—up from around 75 basis points just one week ago, reports RTE.
US-listed Chinese stocks were among the hardest hit, with major firms like JD.com, Alibaba, and Baidu all dropping more than 9%.
Companies with substantial business ties to China also declined across the board. Apple, for example, saw its shares fall by 4.7%.
Wall Street’s main measure of market volatility, the CBOE Volatility Index, surged to its highest level in eight months, climbing to 34.71 points, reports RTE.
Oil prices also plunged by nearly 8% today, marking their lowest levels since mid-2021 during the height of the pandemic.
“The real test, of course, will be if reciprocal tariffs emerge and deal a blow to global oil demand (which is what the market is now pricing in) or is this another smoke-and-mirror negotiating tactic from the Trump team,” said Dennis Kissler, senior vice president of trading at BOK Financial, reports RTE.
“One thing is for sure, the uncertainty is likely going to remain a price headwind for crude for the next few trading days,” Kissler added, reports RTE.
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