European markets respond to escalating tariff anxieties, as Canada and the EU announced countermeasures to the US’ 25% steel and aluminium tariffs.
European markets opened lacklustre as global tariff tensions heated up, following US President Donald Trump’s vow to react to EU counter tariffs. The European response came after the US placed 25% levies on aluminium and steel imports. “Whatever they charge us with, we’re charging them,” Trump said in relation to EU countermeasures.
Britain’s FTSE 100 dropped 0.1% on Thursday morning, with Germany’s DAX index also falling 0.4%. France’s CAC 40 index slid 0.3% on Thursday morning, whereas the STOXX 600 inched lower 0.1%.
All of these indexes then ticked up marginally later in the morning.
Canada also revealed on Wednesday that it would be imposing counter tariffs on US goods worth approximately C$30 billion (€19.2bn). Ontario Premier Doug Ford had also suggested a 25% surcharge on electricity sent to US consumers, although he retracted this on Tuesday. Trump had said he would double planned tariffs on Canadian steel and aluminium imports to 50% on Tuesday – another proposal that has been walked back.
“A rather tame US inflation report lent some support to markets yesterday, but with investors’ concerns focused on the coming impacts of US policy uncertainty and not past inflation, risk assets are back under pressure this morning,” Kyle Chapman, FX markets analyst at Ballinger Group, said.
Investors are also looking forward to the US Federal Reserve’s policy meeting next week, which is expected to shed more light on when future rate cuts may happen.
Asia-Pacific markets overnight
Asia-Pacific stocks tumbled overnight as slowing inflation in the US failed to reassure investors, with worries of a potential US recession still looming.
Japan’s benchmark Nikkei 225 closed around 0.1% lower on Thursday, at 36,790.03, trading close to six-month lows.
China’s Shanghai Composite Index slid 0.4% on Thursday, closing at 3,358.7, falling for the second session, mainly dragged down by AI-related and technology stocks. UBS recently slashed China’s technology sector rating from attractive to neutral. This was mainly because of rally-driven re-evaluation, uncertainty over future growth, as well as tariff risks.
Similarly, Hong Kong’s Hang Seng index also closed around 0.6% lower, at 23,462.6.
Australia’s S&P/ASX 200 also fell roughly 0.5% to 7.749.1 on Thursday, while South Korea’s Kospi was down less than 0.1% at 2,573.6.
US markets, closing prices on Wednesday
The S&P 500 closed 0.5% higher on Wednesday, boosted by a better than expected February inflation report, which showed that price pressures rose 2.8% on an annual basis last month. This was slightly below analyst expectations of 2.9%, as well as a step down from January’s 3%.
Investors have priced in at least three quarter-point interest rate cuts for 2025, which are expected to start in June.
IG said in a note: “President Trump’s new tariffs on steel and aluminum triggered retaliation from Canada and Europe, adding to economic uncertainty. Corporate warnings from Delta and Walmart highlight concerns over profits, while a steep S&P 500 decline hasn’t yet shifted US trade policy, fueling fears of further instability.”
“US Senate Democrats have opposed the latest funding bill, raising fears that another government shutdown looms in Washington,” analysts added.
Dan Coatsworth, investment analyst at AJ Bell, said: “Markets were all over the place once again as investors’ fears intensified over what Donald Trump’s aggressive tactics will do to the US economy. Airlines were among the worst performing sectors after warnings from a trio of operators this week that domestic demand was already softening, not helped by US government spending cuts.”
However, Coatsworth pointed out that this week’s steep sell-off also led to an increase in bargain hunters, looking for relatively cheaper stocks.
“Tesla bounced back, while various tech stocks were winning back some fans. This includes Nvidia as talk on the street gathered pace about how its valuation had gone from top of the skyscraper territory to levels that are easier to stomach.” he said.
The NASDAQ 100 index also closed around 1.1% higher on Wednesday. The Dow Jones Industrial Average Index, on the other hand, dropped 0.2%.
Commodities and currencies
In commodities, US crude oil fell 0.5% to $67.4 per barrel on Thursday morning, with Brent crude oil also dropping 0.4% to $70.2 per barrel.
On the other hand, gold was trading up 0.2% on Thursday, close to record highs.
The EUR/USD pair fell around 0.2% on Thursday morning, with the EUR/GBP pair trading mostly flat.
Corporate earnings today
German fashion retailer Hugo Boss reported group sales of €4.3bn in 2024, along with earnings before interest and taxes (EBIT) of €361 million. Free cash flow came up to €497m.
The company expects group sales this year to be anywhere between €4.2bn and €4.4bn, whereas earnings before interest and taxes (EBIT) is estimated to rise to somewhere between €380m and €440m.
Hugo Boss’ shares rose 2% on the Euronext index on Thursday morning.
Italian insurance company Generali Group also posted record results, with adjusted net result rising 5.4% to €3.8bn, whereas operating profit surged 8.2% to €7.3bn.
Generali’s share price rose 0.1% on the Milan Stock Exchange on Thursday morning.
Italian electricity and gas company Enel is also due to report earnings after market close on Thursday.
