European stocks and currencies fell on concerns about Trump’s tariffs
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European stocks tumbled and currencies slipped against the dollar on Tuesday as investors worried about the impact of a more hawkish approach to China under Trump’s second term as president.
The benchmark Stoxx Europe 600 index lost 2%, its worst one-day performance since the market plunged in early August. Paris’s Cac 40 fell 2.7%, while Frankfurt’s Dax fell 2.1% .
The US dollar continued to rise following last week’s presidential election, with the dollar index rising 0.6% against a basket of six other currencies.
The British pound fell 1.1% to $1.273 and the yen to 154.90 yen, its lowest level since early August. The euro fell 0.5% to $1.06, its weakest level in a year.
The moves came after it was reported that US senator Marco Rubio, a hawk on Iran and China who serves on the Senate foreign relations committee, would become foreign minister. chief in the Trump administration.
Traders are also assessing the growing prospect that Republicans will control both houses of Congress, giving Trump more leeway to push through tax cuts and aggressive trade tariffs. .
“The rest of the world is being squeezed. Europe is being squeezed here. China will also be hurt quite a bit because it is considered a major tariff target, said Tomasz Wieladek, chief European economist at T Rowe Price. “It’s almost like a redistribution of growth from the rest of the world into the U.S. economy,” he added.
Copper, seen as an indicator of global economic health, fell nearly 2% in London as traders feared the commodity would bear the brunt of possible US tariffs. Palladium, used in automotive catalytic converters, fell 4.1%.
Kelly Ke-Shu Chen, an analyst at DNB Markets, said Rubio’s stance would reduce the prospect of “any form of dialogue” between the US and China.
US Treasury yields rose as traders bet that US interest rates may not fall as much as previously thought, with strong economic data and the possibility of Trump administration tax cuts seen is the cause of inflation.
Yields on interest rate-sensitive 2-year notes rose 0.1 percentage point to 4.35% while benchmark 10-year bond yields rose 0.12 percentage points to 4.43%.
According to data from LSEG, in recent weeks, investors have reduced their expectations for the US to cut interest rates by 1 percentage point to only 3/4 of a point by the end of next year.
Laura Cooper, head of macro credit at asset manager Nuveen, said the market was assessing the risk of a relapse. “The potential for yield increases is limited because we will lack a political policy catalyst. [for some time]she said.
The jump in Treasury yields comes ahead of U.S. inflation data released on Wednesday, in which economists polled by Reuters predicted consumer prices would rise 2.6% in October, an increase from 2.4% last month.
In the US stock market, the benchmark S&P 500 index fell 0.2% and the Nasdaq Composite index fell 0.1% to ease from last week’s Trump-led rally.
