European equities opened sharply lower and global bond markets were in turmoil on Wednesday as so-called reciprocal tariffs with 60 trading partners, including a 104% tariff on China, took effect.
The Stoxx Europe 600 index dropped 2.6%, led lower by healthcare stocks including Novartis NOVN, down 6.2%, Sanofi SAN, down 5.4% and Roche ROG, down 5.6%. The Stoxx 600 Health Care sector index was the regional benchmark’s worst performer by mid-day, down 4.3%.
This comes after US President Donald Trump said on Tuesday night he’s “going to be announcing very shortly a major tariff on pharmaceuticals,” in an effort to re-shore drug manufacturing to the US.
US futures pointed to a broadly neutral open in New York as large-cap tech stocks pared recent losses in pre-market trading. Nvidia NVDA was up 2.4%, Tesla TSLA up 2.8% and Palantir PLTR up 3% while pharma giant Pfizer PFE traded 2% lower.
“The market doesn’t know where it is,” Morningstar chief European markets strategist Michael Field said on Wednesday. “Nobody could figure out yesterday’s upward move- but like we said earlier, there is no clear path, we’re likely to see ups and downs from here until the tariff situation is put to bed one way or the other.”
Effective Wednesday, the US is levying a 20% tariff on goods imported from the European Union and a 10% tariff on UK goods-- the baseline imposed on most major trading partners over the weekend. While EU officials have not formulated a response to the levy, China struck back against its 34% tariff with a 34% retaliatory tariff on the US. Trump then raised total US tariffs on China to 104%.
At the end of Asian trading hours, Chinese stocks were broadly unchanged from Tuesday’s close. In contrast with previous US tariff announcements that were met with immediate retaliatory actions, China hasn’t responded to the latest US levies, raising hopes that negotiations might be forthcoming. A general willingness to engage with the US also featured in a trade white paper the Chinese government published on Wednesday.
Global Bond Markets in Turmoil
Government bonds also sold off on Wednesday as investors built up their cash allocations to confront a sudden spike in uncertainty and volatility. Yields on US 10-Year Treasuries, which move in the opposite direction when bond prices decline, spiked to more than 4.5%. As recently as Monday, yields had been as low as 3.9% as safe-haven assets saw high demand.
“The ‘sell America’ scenario is becoming tangible again, as Treasuries and US equities are under pressure,” ING FX strategist Francesco Pesole said. “That can be a very toxic combination for the dollar. Markets are clearly punishing US assets again after 104% China tariffs kicked in.”
The US Dollar Index remained near the lowest level since October of last year, which it reached at the end of the previous week. Crude oil prices continued their slide, with Brent futures testing the $60 level for the first time since the pandemic.
Sara Silano contributed to this article.
