Global Markets Reel as Trump Considers National Economic Emergency
European Shares Plummet
European shares took a nosedive on Wednesday, erasing earlier gains as government bond yields skyrocketed to multi-month highs. The pan-European STOXX 600 index fell 0.5% as of 1244 GMT, with most local bourses also trading in the red.
Bond Yields Soar
Yields across European government bonds surged midday, led by the German 10-year note, which hit its highest level in nearly six months. This mirrored a similar rise in U.S. Treasuries. The UK’s 10-year gilt saw the biggest move among European peers, with its yield jumping to its highest since 2008.
Trump’s Tariff Threat
The catalyst behind the market turmoil was a report that U.S. President-elect Donald Trump was considering declaring a national economic emergency to justify imposing universal tariffs on allies and adversaries. This move would have far-reaching implications for global trade and the economy.
Experts Weigh In
“When you’re talking about an economy like the United States, using language like that is unsettling,” said Danni Hewson, head of financial analysis at AJ Bell. “Those tariffs will cause pain to Europe as well as the global economy. It will cause trade friction and be inflationary in the United States, but also potentially inflationary across Europe as well.”
Sector Impact
Automobiles, a sector already reeling from tariff threats, fell 1.3%. China-exposed luxury heavyweights such as LVMH and Hermes also fell more than 1% each. Utilities, often traded as a bond proxy, fell 1.9%, while rate-sensitive real estate stocks were down 2.2%. Healthcare bucked the trend, edging 0.6% higher, led by Novo Nordisk’s 3.1% gain after UBS upgraded the drugmaker’s shares to “buy” from “neutral”.
Aerospace and Defence Sector Defies Trend
The European aerospace and defence sector mostly held onto gains, up 0.8%, after Trump called for higher spending from NATO allies at a press conference late on Tuesday.
Global Economic Concerns
Government bond yields around the world rose on Tuesday, tracking U.S. Treasuries, after fresh U.S. data raised concerns that the Federal Reserve might slow down its pace of policy easing. In Europe, December euro zone inflation accelerated in line with expectations, while German industrial orders and retail sales unexpectedly fell in November, and euro zone economic sentiment contracted in December.
Stocks in Focus
Shell slipped 1.9% after the energy major trimmed its liquefied natural gas production outlook for the fourth quarter.
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