STOXX 600 Plunges 5.83%, DAX Falls 6.95%

Key moments

European Shares Rocked by Trade War Jitters

European stock markets experienced a dramatic downturn on Monday, with key indices registering substantial losses as anxieties surrounding a potential global trade war intensified. The German DAX index witnessed a major drop of 6.95%. This translated to a fall of over 1,400 basis points for Germany’s benchmark, reflecting the depth of investor concern. The DAX endured an even more severe shock earlier, with its initial plunge nearing a staggering 10%.

The pan-European STOXX 600 index also suffered a significant blow, registering a substantial decrease of 5.83%. The sharp sell-off pushed European equities to their lowest levels since late 2023, highlighting the widespread apprehension among investors regarding the potential economic fallout from escalating international trade disputes.

Adding to the negative sentiment surrounding European equities, financial institution Barclays recently revised its outlook for the STOXX 600 downwards. The firm lowered its year-end forecast for the index to 490 points, a significant reduction from its previous projection of 580 points issued just last month.

The fear surrounding global trade tensions, sparked by recent trade policy announcements from the United States, served as the primary catalyst for European stock sell-offs. The imposition of significant tariffs on imports from key trading partners continues affecting investor sentiments, especially as the European Union, in particular, has been targeted with a 20% levy, twice the baseline 10%. Retaliatory measures from Europe, China, and other affected regions have further fueled concerns about a trade war that would lead to a slowdown in global economic growth.

Statements from US President Donald Trump over the weekend indicated a firm stance on his tariff plans and a lack of immediate intention to de-escalate trade tensions with China. This resolute position triggered significant selling pressure across Asia, which then quickly spread to Europe as trading commenced on Monday.

The prospect of increased tariffs disrupting established global supply chains and hindering international trade is leading investors to anticipate potential interest rate cuts from major central banks, including the European Central Bank and the US Federal Reserve, as a measure to buffer against the anticipated economic headwinds.