Europe midday: Trump tariff 'tantrum' hits Stoxx'; Auto shares slump
By Frank Prenesti
Date: Monday 03 Feb 2025
(Sharecast News) - The Donald Trump tariff "tantrum" hit European markets on Monday with stocks sharply lower after the new US President threatened the European Union with new import levies after doing the same to China, Canada and Mexico.
The pan-regional Stoxx 600 index was down 1.27 at 532, ending a bullish run last week that saw the benchmark index hit record highs, along with indices in Germany and the UK.
Germany's DAX index was down 1.7%, while France's CAC 40 slumped 1.7%, Spain's IBEX 1.25% and Italy's FTSE MIB 0.98%.
"February seems likely to begin with a Trump tariff tantrum, with very early futures prices signalling declines of more than 600 points for the Dow Jones, and declines of 2% or more for the benchmark S&P500 and Nasdaq indices," said Interactive Investor head of markets Richard Hunter.
Automakers, expected to bear the brunt of tariffs, were all hit hard. Shares in French car parts supplier Valeo were down almost 7% in early trade. Renault, BMW, Volkswagen, Daimler Truck, Stellantis and Porsche were all lower.
The hard-right Trump over the weekend said he would hit the EU with tariffs, reheating old grievances about the bloc not importing enough US vehicles and agricultural products. He also called the trade deficit between the two economies "an atrocity". The 27-member EU has said it would retaliate if Trump follows through on his threats.
"Stocks slipped as investors reacted to Donald Trump's tariffs. It's less of a negotiating tactic than a sledgehammer," said TipRanks analyst Neil Wilson.
"The euro also skidded lower as markets don't think this is the end of things. The question is whether this is the beginning of a damaging trade war or something less sinister. It seems from the selling pressure that the market underestimated Trump - not for the first time."
"But whether this is resolved in short order or drags out and spirals is unknown. If the tariffs stay in place it would mean a significant redrawing of trade terms and currencies will need to adjust to reflect that. Trump is due to speak to the leaders of Canada and Mexico today - a sliver of hope, perhaps?"
In economic news, eurozone inflation was expected to hit 2.4% in January, up 0.1%, driven by a spike in energy prices, according to a flash estimate from the European Union.
Meanwhile, pressures on the single currency bloc's manufacturing sector eased last month but were still some way from recovery, the results of a widely-read survey showed.
The eurozone manufacturing purchasing managers index (PMI) came in at 46.6 in January rising from 45.1 in December - an eight-month high, S&P Global and Hamburg Commercial Bank (HCOB) said.
It also revealed that the sector's output index also hit an eight-month high, jumping to 47.1 in January from December's 44.3. Both readings are still well below the 50 mark that separates contraction from expansion.
Reporting by Frank Prenesti for Sharecast.com
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