U.S. President Donald Trump announced an increase in tariffs on imported steel and aluminum to 50%, reigniting fears of a full-scale trade war. China quickly rejected the U.S. accusations of violating the Geneva trade agreement and threatened defensive measures, while the European Union affirmed its readiness to respond in kind. This escalation shook investor confidence, especially after Washington officially confirmed that trade talks with Beijing had stalled.
U.S. markets opened the week in negative territory, with the Nasdaq and S&P 500 indices giving up part of their strong May gains. The decline was driven by investor concerns over the potential impact of renewed trade tensions on global economic growth. In Europe, the Stoxx 600 index fell by 0.5%, with major exchanges in Frankfurt and Paris posting similar losses. Export-driven sectors, particularly automotive and luxury goods, were among the hardest hit. Stellantis shares dropped nearly 3%, while Mercedes, BMW, and Volkswagen fell by more than 1.5%.
Despite the overall downturn, some sectors found support amid geopolitical uncertainty. Energy stocks rose, supported by a climb in crude prices after OPEC+ announced a moderate production increase of 411,000 barrels per day less than market expectations which helped ease selling pressure on oil. The defense sector also benefited from renewed tension between Russia and Ukraine. Shares of Hensoldt surged 7.2% after J.P. Morgan upgraded its investment rating.
Investors are now closely watching key decisions from the European Central Bank (ECB) this week, with markets widely expecting a 25 basis point interest rate cut. The spotlight will be on comments from ECB President Christine Lagarde regarding the possibility of slowing the pace of monetary easing in July, especially as some eurozone economic indicators have shown improvement. In the U.S., Federal Reserve Governor Christopher Waller indicated that a rate cut remains a possibility this year, offering a degree of reassurance to the markets.
Meanwhile, Bitcoin rebounded after a weekend slump, buoyed by investor optimism over the future of digital assets and growing corporate adoption. In the pharmaceutical sector, French drugmaker Sanofi announced a $9.1 billion acquisition of a U.S. based company specializing in autoimmune disease treatments highlighting ongoing merger activity despite market volatility.
Stay informed about global markets through our previous analyses. and Now, you can also benefit from LDN company services via the LDN Global Markets trading platform.
