European markets closed sharply lower on Tuesday as global investors brace for the global impact of fresh U.S. tariffs on Mexico, Canada and China, along with retaliatory action.
The Stoxx 600 index provisionally closed 2.2% lower, marking its biggest daily drop since August last year. The Stoxx 600 basket of automotive stocks — one of the sectors expected to be most impacted by the new duties — fell 5.7%.
Among the companies hit were Dodge-maker Stellantis, closing down 10%, and Mercedes Benz, lower by 5%.
French defense firm Thales jumped as much as 12% in earlier deals after reporting higher income and revenue for the full-year 2024 period. Shares closed 2.5% higher. The company was among many European military manufacturers to gain ground on Monday on expectations of higher regional spending.
On Monday, all three major U.S. indexes dropped into negative territory after Trump confirmed in the afternoon that the U.S.′ 25% duties on Canada and Mexico would go into effect the following day and that that there was “no room left” for the two nations to negotiate these new import tariffs. Trump also slapped an additional 10% tariff on Chinese goods.
In retaliation, China announced overnight that it would impose additional tariffs of up to 15% on some U.S. goods and restrict exports to 15 U.S. companies.
European markets traded higher on Monday, amid a charge in defense shares after regional leaders held security talks that touched on bolstered military spending. Elsewhere, euro zone inflation data encouraged expectations that the European Central Bank will cut interest rates when it meets on Thursday.
European stock markets closed provisionally lower on Tuesday with Germany’s Dax down by 3.5%, the U.K.’s FTSE 100 lower by 1.3%, and France’s CAC 40 down 1.9%.
The regional Stoxx 600 was also lower shedding 2.2%, marking its biggest daily drop since August last year.
Stoxx 600 on track for biggest daily fall since August
The pan-European Stoxx 600 index is on track for its biggest daily drop since August 2024 after falling 2.2% in afternoon deals.
The Stoxx 600 index last saw its biggest daily fall of 2.17% on August 5, 2024.
U.S. stocks open lower
Stocks kicked off Tuesday’s trading session in the red.
The Dow and S&P 500 each slipped 0.8% shortly after 9:30 a.m. ET. The Nasdaq Composite dropped 1.1%.
Euro zone unemployment rate holds steady at 6.2%
Unemployment in the euro area held steady at 6.2% in January, according to data released by statistics agency Eurostat Tuesday.
This was unchanged from December’s 6.2%, and lower than January 2024′s 6.5%.
The rate in the wider European Union came in at 5.8%, down slightly from December’s 5.9%.
“January’s unemployment rate came in slightly below our expectation of 6.3%, and outturns for the previous few months were revised down slightly,” Ankita Amajuri, assistant economist at Capital Economics, said in a note.
“While the low unemployment rate suggests that the labor market remains tight, there are other signs that firms’ demand for workers is softening. Job vacancies are falling, survey indicators of hiring intentions are declining, and the number of furloughed workers in Germany is rising,” she added.
“With the near-term economic outlook weak, we think that it won’t be long before the unemployment rate starts to rise, though we suspect that any increase will be small.”
