Global Markets: European and Asian Exchanges Sharply Decline at the Start of the Week

On European exchanges on Monday morning, stock prices sharply declined after U.S. President Donald Trump announced that the reciprocal tariffs he will present this week will include all countries. The STOXX 600 index of leading European stocks was down 1.2 percent at 9:30 AM. Meanwhile, the London FTSE index weakened by 0.98 percent to 8,576 points, while the Frankfurt DAX slid 1.09 percent to 22,217 points, and the Paris CAC fell 1.11 percent to 7,828 points.

Asian stock prices also sharply declined. The MSCI Asia-Pacific index was down 1.9 percent at 9:30 AM. The Japanese Nikkei index plummeted more than 4 percent, while stock prices in Shanghai, Australia, Hong Kong, and South Korea fell between 0.5 and 3 percent. The sharp decline in the index is a result of Trump’s message on Sunday that the reciprocal tariffs to be announced this week will include all countries.

This has shaken the markets as the White House had recently indicated that the new tariffs would apply only to a smaller group of 10 to 15 countries with which the U.S. has the largest trade imbalances, that there would be exceptions, and that the tariffs might not be as high as initially announced. Trump is expected to receive the proposal from U.S. trade officials on Tuesday and present the implementation plan on Wednesday, when the 25 percent tariffs on car imports also take effect.

As many countries, including China, Canada, and the European Union, have announced countermeasures, investors fear an escalation of the trade war, which could lead to rising inflation and negatively impact international trade and global economic growth. Consequently, U.S. futures indices S&P 500 and Nasdaq are also down this morning – between 0.6 and 1.2 percent.

Stocks are under pressure as investors pull back from riskier investments and seek refuge for capital in safer investments, such as government bonds and certain currencies.

– For the first time in several years, we are concerned about riskier assets. If this political chaos and trade wars worsen, the risk of recession in the largest economies will increase. For the first time after several quarters, we are turning more towards fixed-income investments and less towards stocks, says Ajay Rajadhyaksha, head of markets at Barclays Bank.

Dollar Weakens, Oil Prices Slightly Decline

On the currency markets, the value of the dollar against a basket of currencies has slightly declined.

The dollar index, which shows the value of the U.S. dollar against the other six major world currencies, is around 103.88 points this morning, down from 104.01 points on Friday evening. The dollar’s exchange rate against the Japanese currency slipped from 149.90 to 149.10 yen. The U.S. currency also weakened against the euro, with the euro price reaching 1.0835 dollars, up from 1.0827 dollars on Friday evening.

Oil prices, on the other hand, have lost some of last week’s gains. The price of a barrel on the London market weakened by 0.31 percent to 73.40 dollars, while on the U.S. market, a barrel decreased by 0.49 percent to 69.05 dollars.

Record Gold Price

The price of gold, considered a safer haven for capital in uncertain times, reached a new record level this morning – 3,111 dollars per ounce. Due to uncertainty in the financial markets, the price of gold has risen more than 18 percent since the beginning of the year, on track for the largest quarterly jump since 1986.