European stocks may face heavy selling pressure on Monday amid concerns that U.S. President Donald Trump’s tariff war and possible retaliatory measures by the U.S.’s main trading partners may create unnecessary economic disruption, drive inflation higher and keep interest rates elevated for longer.
Soon after Trump on Saturday followed through with his threats to impose stiff tariffs on Mexico, Canada and China, Mexican President Claudia Sheinbaum said her country would impose retaliatory tariffs.
Outgoing Canadian Prime Minister Justin Trudeau announced “far-reaching” retaliatory levies and China said it would “take corresponding countermeasures,” instigating a trade war that’s set to reshape global supply chains.
A spokesperson for the European Union on Sunday said he is not aware of any additional tariffs being imposed on EU products, but the 27-nation bloc would respond firmly if targeted.
Brussels had until now indicated it hoped to avoid a trade conflict with Trump through negotiation.
Asian markets were deep in the red, with benchmark indexes in Australia, New Zealand, South Korea, Hong Kong and Japan all falling 1-3 percent.
A private survey released earlier today showed that China’s factory activity grew at a slower pace in January amid increased trade uncertainties.
An official survey released last week showed China’s manufacturing activity unexpectedly contracted at the start of 2025.
Gold prices fell from a record high in Asian trade following a sharp rise in the dollar index and a jump in the yields on two-year U.S. Treasuries.
Oil prices climbed in Asian trade, with WTI crude futures rising nearly 2 percent on concerns about potential disruptions in oil supply chains, particularly from Canada and Mexico, which are significant crude suppliers to the U.S.
In addition to concerns about U.S. tariffs, reaction to U.S. reports on employment, job openings, manufacturing and service sector activity along with earnings from Alphabet, Amazon, Pfizer and Disney may sway market sentiment as the week progresses.
U.S. stocks gave up early gains to end lower on Friday after the White House confirmed that tariffs of 25 percent on Canadian and Mexican imports and an additional 10 percent tax on Chinese goods would come into force on Tuesday.
Trump also said he expects his administration to impose tariffs related to oil and gas around Feb. 18 without specifying any more details about the plan.
Upbeat earnings news from Apple and reports showing strong U.S. consumer spending and a moderate increase in inflation in December helped limit the overall downside to some extent.
The Dow shed 0.8 percent, the S&P 500 dipped half a percent and the tech-heavy Nasdaq Composite eased 0.3 percent.
European stocks closed broadly higher on Friday despite some profit taking in late afternoon trades as investors reacted to a slew of earnings releases.
The pan European STOXX 600 rose 0.1 percent. The German DAX finished marginally higher, France’s CAC 40 edged up by 0.1 percent and the U.K.’s FTSE 100 added 0.3 percent.
Business News
European Shares Set To Fall On Tariff Concerns
2025-02-03 05:52:32
