Financial Markets Brace for Impact as US-EU Trade Tensions Intensify
Stock market plummets following Trump's latest announcement
In a development that could have significant implications for global financial markets, US President Donald Trump's latest tariff threats against the European Union (EU) have sparked a sell-off in several key sectors. The German benchmark index, the EuroStoxx 50, and the French Cac-40 all experienced heavy losses on Friday.
Trump has announced plans to impose tariffs of 50% on products from the EU, set to take effect on June 1. In a post on his online platform Truth Social, he criticized the EU, stating that it was founded primarily to exploit the USA in trade and that negotiations with them lead to nothing. The EU Commission has yet to comment, awaiting a phone call between EU Trade Commissioner Maros Sefcovic and US representatives.
Market analyst Andreas Lipkow described the situation as a "cold shower" before the weekend, suggesting that the US is attempting to escalate the tariff negotiations with the EU and accelerate the negotiating dynamics.
While the struggling German economy showed a 0.4% growth in the first quarter, double the initial estimate, this didn't prevent the stock market downturn. Thomas Gitzel, chief economist of VP Bank, pointed out that this growth is a one-off effect, owing to tariff disputes and frontloading effects. A lower growth rate is expected for the current quarter.
Bank, automotive, and technology stocks bore the brunt of the selling pressure following Trump's threat. Deutsche Bank, Commerzbank, BMW, Mercedes-Benz, Porsche AG, Volkswagen, Infineon, and Jenoptik all experienced significant losses. In contrast, Evotec shares continued their recovery rally, approaching the exponential 200-day line once more after announcing a strategic realignment with a significant reduction in their project portfolio.
In the SDax, PVA Tepla's shares saw a temporary rise following a buy recommendation from Deutsche Bank, while Innoscripta, a Munich-based software service provider, saw losses after its stock market debut.
Gold prices surged on Friday, seen as a safe haven for investors during times of economic uncertainty. As tariff threats loom, gold continues to build on early gains, trading at $3,355 on the London Stock Exchange, around $60 higher than the previous day. Gold is approaching its record high of mid-April at $3,500. In May, gold temporarily fell to $3,120 but has since recovered significantly.
Businesses in the stock market are experiencing heavy losses due to the intensifying US-EU trade tensions, as President Trump's latest tariff threats have sparked a sell-off, particularly in the banking, automotive, and technology sectors. In light of these trade disputes, investors are turning to safer assets such as gold, with its price surging on Friday and approaching its record high.
