European equity markets opened the week on a bearish note, with the pan-European STOXX 600 index falling 0.6% to 544.3 points as of 0706 GMT on Monday. The slide was largely attributed to U.S. President Donald Trump’s renewed threat to impose steep tariffs on imports from the European Union and Mexico, beginning August 1.
The automobile sector led the losses, plunging 1.4%, as investors priced in the potential impact of 30% import duties on EU-manufactured vehicles and components. The retail sector also declined, shedding 1% on concerns over reduced transatlantic trade volumes and consumer sentiment.
Trump’s tariff threat comes after weeks of stalled negotiations with the EU and Mexico, raising fears of a revived trade war just as markets showed signs of post-pandemic recovery.
In response to the U.S. announcement, the European Union vowed to extend its suspension of countermeasures until early August, emphasizing efforts to continue pursuing a negotiated resolution. However, Italian Foreign Minister Antonio Tajani revealed that the EU has already drawn up a counter-tariff list worth €21 billion ($24.5 billion) in case talks break down.
Despite the overall decline, there were a few bright spots in the market. Pharmaceutical major AstraZeneca gained 1.9% after announcing that its experimental hypertension drug Baxdrostat successfully met all primary and secondary endpoints in a late-stage trial. This news helped prop up the broader healthcare sector, which provided some support to the falling STOXX 600 index.
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Regional Market Snapshot:
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STOXX 600: -0.6%
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Germany’s DAX: Lower
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France’s CAC 40: Lower
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UK’s FTSE 100: +0.2% (boosted by mining and energy stocks)
As investors weigh the geopolitical risks associated with escalating trade tensions, market volatility is expected to remain elevated in the short term. Analysts warn that prolonged uncertainty could disrupt global supply chains, especially in automotive, consumer goods, and industrial sectors.