European shares log biggest daily decline in two months
The pan-European STOXX 600 dropped 1.2%, with benchmarks in export-heavy economies such as Germany and France down more than 1.3% each
European shares logged their biggest daily decline in two months on Monday as investors were rattled by President Donald Trump’s threat of additional tariffs on eight European countries until the U.S. is allowed to buy Greenland.
The pan-European STOXX 600 dropped 1.2%, with benchmarks in export-heavy economies such as Germany and France down more than 1.3% each.
Trump said he would impose an additional 10% tariff starting February 1 on goods from Denmark, Norway, Sweden, France, Germany, the Netherlands, Finland and Britain, rising to 25% on June 1 if no deal is reached.
The threats triggered a sharp pushback in Europe, with the reaction reminiscent of the volatility seen when Trump imposed tariffs on global economies last April. His remarks also raised questions on the outlook of trade deals struck since then with Europe.
Global leaders and corporate executives are at the World Economic Forum in Davos, comments at which will be scrutinised for tariff cues and geopolitical signals.
We doubt that the tariffs will be implemented as advertised, said Andrew Kenningham, chief Europe economist at Capital Economics, adding he believed the EU would be cautious with any retaliation “to avoid further escalation.”
Luxury, automobile and technology stocks were among the biggest losers, sliding 3%, 2.2% and 2.9%, respectively.
A gauge for euro zone equity volatility climbed 3.75 points to its highest since November.
Trump’s actions over the weekend have inflamed geopolitical risks while also reintroducing trade uncertainty. After a low-volatility start to the year, equities may experience some downside pressure, said Kyle Rodda, senior financial market analyst at Capital.com.
Market reaction could also be exaggerated due to thin trading volumes because of the Martin Luther King Jr. Day holiday in the U.S.
Bucking declines, Beazley soared around 43% after Zurich Insurance Group announced a $10.3 billion all-cash offer to buy the UK speciality insurer.