LONDON – European and Asian stock markets diverged yesterday after a sharp sell-off on Wall Street fuelled by fears about the US economy as president Donald Trump presses ahead with steep tariffs.
Traders had initially welcomed Trump’s election win in late 2024, optimistic that his promised tax cuts and deregulation would boost the world’s biggest economy and help equities push to further record highs.
But there is now a growing pessimism that a recession could be on the card amid warnings that tariffs imposed on key trading partners will reignite inflation, forcing the Federal Reserve to again start raising interest rates.
“Markets are jittery and volatility seems like the only certainty while the White House pushes hard to usher in a new era, seemingly happy for stock markets to be collateral damage,” said Matt Britzman, senior equity analyst at Hargreaves Lansdown.
The president’s weekend comments that the economy was facing “a period of transition” and his refusal to rule out a recession did little to soothe investor worries.
London’s stock market dipped in morning deals yesterday, while Paris and Frankfurt edged higher, helped by gains for infrastructure and defence stocks on European spending plans.
A new wave of US tariffs due this week will see levies of 25% on steel and aluminium imports.
Fears about the future battered Wall Street on Monday, where the Nasdaq tanked 4%, owing to another plunge in high-flying tech titans including Apple, Amazon and Tesla.
Asia followed suit in early trading Tuesday, with big losses across the board, though they recovered a bit as the day wore on.
Tokyo was hit after Japanese Trade minister Yoji Muto said he had failed to win an immediate exemption from US tariffs.
Hong Kong was flat and Shanghai ended higher despite falling sharply at the open.
US futures also inched higher, having first extended Monday’s losses.
“Trump’s trade policies, including ongoing tariff discussions, are creating uncertainty and fears of economic slowdown,” said Shaun Murison, senior market analyst at the online trading platform IG.
“These tariffs could potentially elevate prices and complicate efforts to reduce interest rates,” he said.
The weak sentiment also filtered through to bitcoin, which tumbled below US$80,000 on Monday to its lowest level since November — having hit a record of close to US$110,000 in January.
But it also pared its losses Tuesday to sit just above the $80,000 mark.
The cryptocurrency’s losses have also been driven by disappointment that Trump signed an executive order to establish a “Strategic Bitcoin Reserve” without planning any public purchases of it.
Oil prices rebounded after dropping more than 1% Monday on worries about demand as US recession speculation builds.
However, both main contracts remain down around 7% for the year so far.
In company news, shares in Volkswagen climbed 2% as the German auto giant signalled higher revenue for the year ahead after posting a sharp loss in annual profits for 2024.
– Nampa/AFP