European markets respond to escalating tariff anxieties as Canada and the EU announced countermeasures to the US’ 25% steel and aluminium tariffs.
ADVERTISEMENTEuropean markets were mixed on Thursday afternoon following US president Donald Trump’s vow to react to EU counter tariffs – which are set to hit $28 billion of US goods. 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 on Wednesday. The following day, the US president also threatened to hit the EU with a 200% tariff on all alcoholic products, as retaliation to the bloc’s 50% whiskey tariff.
Britain’s FTSE 100 dropped 0.1% on Thursday afternoon at 3:40 GMT, with Germany’s DAX also falling 0.7%. France’s CAC 40 index slid 0.8% on Thursday afternoon, whereas the STOXX 600 inched 0.3% lower.
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 open
The S&P 500 opened 0.2% lower on Thursday, as markets reacted to Trump’s threats to impose 200% tariffs on all alcoholic products from the EU, in response to the EU’s 50% whiskey tariff.
“The European Union, one of the most hostile and abusive taxing and tariffing authorities in the World, which was formed for the sole purpose of taking advantage of the United States, has just put a nasty 50% Tariff on Whisky,” said Trump in a post on his social media platform, Truth Social.
“If this tariff is not removed immediately, the US will shortly place a 200% tariff on all wines, champagnes and alcoholic products coming out of France and other EU represented countries” he continued.
“This will be great for the wine and champagne businesses in the US.”
ADVERTISEMENTEuropean alcohol companies’ share prices faltered, with LVMH dipping 0.9% on Thursday afternoon and Pernod Ricard plunging 4.2%.
A better-than-expected February inflation report on Wednesday, which showed that price pressures rose 2.8% on an annual basis last month, helped support markets somewhat. 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.”
ADVERTISEMENT“US Senate Democrats have opposed the latest funding bill, raising fears that another government shutdown looms in Washington,” analysts added.
The NASDAQ 100 index also opened 0.9% lower on Thursday, while the Dow Jones Industrial Average Index fell 0.4%.
US tech stocks were a mixed bag on Thursday, with Tesla falling 4.9% at 3:30pm GMT on the NASDAQ index, and Nvidia up 0.4% on NASDAQ at the same time. Microsoft was down 0.8% around the same time on the NASDAQ index too.
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.
ADVERTISEMENTOn 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.
ADVERTISEMENTHugo 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 expected to report earnings after market close on Thursday.
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