European and Asian stocks nosedived at Monday’s open, continuing the worst market rout since the start of the coronavirus pandemic, after US President Donald Trump indicated he’ll stand by his tariff policies.
The Stoxx Europe 600 index fell more than 5%, following even steeper declines for Chinese equities. US equity futures point to a grim open in New York, with futures on the S&P 500 indicating a 3.5% drop and Nasdaq futures down more than 4%.
In a social media post on Sunday, Trump appeared committed to staying the course with the United States’ most sweeping tariffs in over a century. “The only way this problem can be cured is with TARIFFS, which are now bringing Tens of Billions of Dollars into the U.S.A. They are already in effect, and a beautiful thing to behold,” he wrote on Truth Social.
US Stocks on Track to Enter Bear Market
The technology-heavy Nasdaq composite index entered a bear market on Friday, having declined by 20% from its most recent peak. Ahead of Monday’s US market open, futures on the wider S&P 500 benchmark indicate that the index is on track to formally enter a bear market.
In US pre-market trading, ‘Magnificent 7′ stocks resumed the previous week’s slump, with Nvidia NVDA down 4.7%, Tesla TSLA down 6.6% and Apple AAPL down 3.6%.
Investors Afraid to ‘Buy the Dip’
“The sell-off in markets hasn’t yet been to the same magnitude as that of March 2020, but it has shocked investors just the same,” Morningstar chief European markets strategist Michael Field said on Monday. “One key similarity with that time is the lack of visibility on whether things could get a lot worse for global markets before they get better, deterring investors from buying the dip.”
“The key difference between now and then however, is that our current situation is entirely manmade and could in theory be fixed overnight. Whether the optimism around this outweighs the risk of our global trade system being permanently upended, will determine the market direction from here.”
Chinese Stocks in Historic Selloff
A dramatic plunge in Asian equities preceded the comparatively benign declines in European stocks and US futures, with Hong Kong’s Hang Seng index ending the session down 13.2%, its worst performance since the Asian Financial Crisis in 1997.
The mainland-focused CSI 300 index fell 7% compared to Friday, while Japan’s Nikkei 225 benchmark finished the session 7.8% lower and South Korea’s KOSPI fell 5.6%
Steep Declines Mark End of Defense Stock Rally
Among European stocks, Monday’s declines were led by the aerospace & defense sector, continuing the reversal of a dramatic rally the sector had been experiencing since the start of the year.
German defense champion Rheinmetall RHM fell 10%, while peers Leonardo LDO declined 9% and BAE Systems BA. fell 3.4%. France’s Thales HO and Dassault Aviation AM were down 7% and 9% by mid-day, respectively.
Among smaller names in the sector, defense electronics firm Hensoldt HAG and shipbuilder Fincantieri FCT were both down about 9%.
