Trump Tariff Threat to Weigh Risk Sentiment, European Stocks

(Bloomberg) -- US President Donald Trump’s announcement of caller tariffs connected 8 European countries implicit Greenland weighed hazard sentiment arsenic trading kicked disconnected connected Monday, with the region’s equities facing the brunt of immoderate selloff.

Most large currencies were quoted weaker against the dollar successful aboriginal trading, with the euro and lb sterling starring declines among Group-of-10 peers. The yen and Swiss franc were indicated somewhat stronger arsenic traders sought haven assets.

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Trump connected Saturday announced a 10% tariff arsenic of Feb. 1 connected goods from European countries that person rallied to enactment Greenland successful the look of US threats to prehend the semi-autonomous Danish territory. He said the levies would summation to 25% successful June unless and until “a Deal is reached for the Complete and Total acquisition of Greenland.”

The announcement drew a speedy rebuke from European leaders including French President Emmanuel Macron, who intends to petition the activation of the European Union’s anti-coercion instrumentality — the bloc’s astir almighty retaliatory tool. European Union lawmakers are besides poised to halt support of the commercialized woody with the US that was struck past year, mounting a 15% US tariff for astir EU goods.

“In the adjacent term, immoderate astonishment escalation via tariffs connected Europe could trigger a classical risk-off episode, particularly aft a beardown commencement to the twelvemonth supported by constructive sentiment,” said Florian Ielpo, caput of macro probe astatine Lombard Odier Asset Management. “In that scenario, authorities bonds could benefit, prime assets would apt outperform, and golden could drawback a bid,” helium added.

The interaction is apt to beryllium connected equities successful the short-term and little evident for bonds and currencies, according to Vincent Mortier, main concern serviceman astatine Amundi SA. The US vacation connected Monday besides suggests thinner marketplace conditions and nary Treasury currency commercialized overnight.

The fallout from the quality “could person immoderate antagonistic interaction connected European maturation prospects but astir most apt connected a precise constricted scale,” Mortier said. “Longer term, that could beryllium a affirmative catalyst for Europe to accelerate its strategical autonomy docket and signifier caller alliances.”

Trump’s tariff menace could beryllium an unwelcome interruption to the rally successful European equities, which person outperformed their US peers arsenic investors poured into assorted determination sectors from defence to miners and chip-equipment makers. The region’s outlook has been boosted by accrued German fiscal spending, little involvement rates and expectations of improving profits.