The FTSE 100 and European stocks experienced a second day of decline on Tuesday as investors assessed the latest developments in US President Donald Trump’s trade disputes. The previous day concluded with the US and Canada agreeing to a 30-day suspension of the 25% tariffs that were slated to impact Canada. Concurrently, Trump’s decision to levy an additional 10% tariff on all Chinese imports came into effect, prompting China to retaliate with tariffs on specific US goods and companies.
Table Content:
- European Markets Open Lower Amidst Trade Tensions
- Oil Prices Decline Following Tariff Announcements
- Gold Prices Near Record Highs on Safe Haven Demand
- Automakers Respond to Tariff Developments
- US Pre-Market Trading Shows Slight Decline
- China’s Retaliatory Tariffs Detailed
- Summary of Tariff Updates
- US Markets Recap: Monday’s Performance
- Conclusion: Markets Navigate Ongoing Trade Uncertainty
European Markets Open Lower Amidst Trade Tensions
The FTSE 100 fell 0.5% at the opening bell, with Vodafone Group experiencing a significant 5.9% drop after reporting declining sales in Germany. Germany’s DAX and France’s CAC 40 each dipped 0.1%. The broader pan-European STOXX 600 declined 0.4%. Despite impending earnings announcements and the threat of a Chinese probe related to the tariff measures, Google stock showed resilience in pre-market trading, with futures up 1.2%.
Oil Prices Decline Following Tariff Announcements
Oil prices extended their losses following the news of the tariff suspension for Canada and Mexico, but the imposition of tariffs on China. Brent crude futures fell 1.1% to $75.01 per barrel, while US West Texas Intermediate (WTI) crude dropped 1.8% to $71.82 per barrel. China’s 2024 crude oil imports from the US represent a small fraction (1.7%) of its total imports.
According to June Goh, senior analyst at Sparta Commodities, “WTI flows to China will be affected, as a 10% tariff…will make WTI delivered to China very expensive compared to other alternatives like Kazakhstan’s CPC and Abu Dhabi’s Murban.” However, Goh added, “In the grand scheme of things, this shouldn’t significantly impact the price of WTI as it can still easily flow to other regions.” Meanwhile, the OPEC+ group decided to maintain its current supply strategy, continuing to increase production by 120,000 barrels per day each month starting in April.
Gold Prices Near Record Highs on Safe Haven Demand
Gold prices remained near record highs, driven by safe-haven demand fueled by China’s retaliatory tariffs and anticipation of key US jobs data. Spot gold rose 0.5% to $2,814.35 per ounce, while gold futures dipped 0.5% to $2,841.40.
Nicholas Frappell, global head of institutional markets at ABC Refinery, commented, “It’s quite likely that a broader range of tariffs will be applied or discussed, creating more volatility, and gold will likely benefit despite the strong dollar.” Gold is traditionally considered a hedge against inflation and geopolitical uncertainty. Recent weeks have seen US gold and silver prices surge above international benchmarks, leading to a rush of these metals into the US before potential tariffs. IG market strategist Yeap Jun Rong projects a near-term price target of $2,874, followed by the psychologically significant $3,000 level. Investors are also awaiting this week’s US jobs reports, including job openings data, the ADP employment report, and the nonfarm payrolls report.
Automakers Respond to Tariff Developments
Car manufacturers remain in focus as the tariff situation unfolds. Neil Wilson, analyst at TipRanks, highlighted the performance of several automakers: GM (-3.15% Monday, +2.5% pre-market Tuesday), Ford (-1.88% Monday, +1.62% pre-market Tuesday), and VW (weakening on China news but experiencing some relief from the Mexico/Canada tariff delay). According to S&P Global Mobility, a significant portion of US sales for several automakers are produced in Mexico: VW (43%), Nissan (27%), and Stellantis (23%). GM has a higher exposure than its peers, with 22% of its US sales produced in Mexico compared to 15% for Ford.
US Pre-Market Trading Shows Slight Decline
US stocks were slightly lower in pre-market trading.
China’s Retaliatory Tariffs Detailed
China’s proposed retaliatory tariffs include a 15% tariff on coal and LNG, a 10% tax on crude oil, agricultural machinery, pickup trucks, and large-engine cars. Additionally, China is initiating an anti-monopoly investigation into Google, implementing export controls on 25 rare metal products, and adding PVH Corp (owner of Calvin Klein and other brands) and US biotechnology company Illumina to its “unreliable entities” list.
Summary of Tariff Updates
The tariff landscape underwent several changes overnight. The tariffs, initially scheduled for Tuesday, included 25% duties on Canada and Mexico and 10% on China, with a lower 10% duty on Canadian energy imports. Mexico and Canada have secured temporary reprieves. Mexico agreed to deploy soldiers to its border with the US to address fentanyl and illegal immigration, resulting in a one-month delay in tariffs. Canada secured a 30-day postponement after agreeing to reinforce its border. China responded to the US tariffs with retaliatory measures on various American products.
US Markets Recap: Monday’s Performance
US stocks declined on Monday in response to the planned tariff rollout. The Nasdaq Composite closed down 1.2%, the S&P 500 fell roughly 0.7%, and the Dow Jones Industrial Average dropped 0.3%. Consumer discretionary and tech stocks were particularly affected, with companies like Nvidia, Apple, and Tesla experiencing declines exceeding 2.5%.
Conclusion: Markets Navigate Ongoing Trade Uncertainty
Global markets are reacting to the fluid dynamics of international trade disputes. The temporary reprieve for Canada and Mexico provides a brief respite, but the ongoing tensions with China and the potential for escalating retaliatory measures continue to weigh on investor sentiment. As the situation evolves, markets will likely remain volatile, with investors closely monitoring developments and seeking clarity on the long-term implications for global trade and economic growth.
