European stock markets are tumbling to 16-month lows on Monday, as investors grapple with the possibility of a recession following widespread tariffs announced by the United States last week.
US President Donald Trump showed no signs of backing down from trade tariffs despite China’s retaliation, pushing investors to weigh potential interest rate cuts by the European Central Bank (ECB) and the Federal Reserve (Fed).
Key Points
- Market Impact: The pan-European STOXX 600 index plunged by 5.8% at 07:22 GMT, after recording its largest daily drop since the COVID-19 pandemic on Friday.
- German Index: The German benchmark, sensitive to trade, dropped by 6.6%, making it one of Europe’s most affected indices. Commerzbank and Deutsche Bank fell by 10.7% and 10%, respectively.
- Defense Stock Declines: Armament manufacturers also experienced losses this Monday, with Rheinmetall tank manufacturer down 23.7%, Hensoldt, and Renk dropping between 17% and 21%.
- Banking Sector Concerns: A European banking stock index fell by 4.8%, putting it more than 20% below its recent closing peak, potentially confirming a bearish market trend.
Trump reiterated to journalists over the weekend that he would not alter his policies until the US trade deficit was addressed, sparking another wave of sell-offs in Asian markets. Investors now assess the ECB’s deposit rate at 1.70% for December, down from 1.75% on Friday and 1.9% last week before Trump’s tariff announcement.
