European markets plunge on open as Trump tariffs sweep globe
Make us a preferred source
Make us a preferred source on Google
The news: Global stocks fell and government bonds rallied on Thursday after US President Trump’s Wednesday trade tariff announcement was more severe than anticipated. Trump’s 10% baseline tariff on goods imported to the US on top of steep ‘reciprocal’ tariffs are upending global trade and threaten to throw the world into a full-blown trade war.
The numbers: The Stoxx Europe 600 index was down 1.3% in mid-morning trading, coming back from a steeper decline in early trading as investors piled into Treasuries and German Bunds.
A rush toward ultra-safe government bonds drove US Treasury yields down towards 4% and Germany's 10-year yield, the European benchmark borrowing rate, went 8.5 basis points lower to 2.64%.
Futures tracking the S&P 500 and Nasdaq were down 2.8% and 3% respectively. The US dollar fell over 1% to a six-month low as traders diverted away from the currency, pushing the Euro up 2%.
The drops tracked declines in Asia which saw stocks post heavy losses earlier in the day, with Tokyo’s Nikkei index losing almost 3%.
The Australian sharemarket pared early losses of around 2% to finish 0.94% lower, as investors digested the tariff news.
The context: Markets are expected to remain volatile as investors and governments navigate their response to the ‘Liberation Day’ tariffs. A number of countries including Australia, the UK and Singapore have indicated that they will seek to negotiate a response with the US rather than retaliate with counter tariffs.
Goldman Sachs said on Thursday that the tariffs implied a weighted average tariff of 18%, around 3% higher than the bank had forecast. A note to clients said that a list of tariff exemptions on energy products, pharmaceuticals, and semiconductors worth USD1.1 trillion ($1.73 trillion) implies that the tariffs on cover two-thirds of all US imports. This leaves the door open to “additional sectoral tariffs” which it warns would add to the overall effective tariff rate.
The sources: Capital Brief, Financial Times, Bloomberg, Reuters
