Amid escalating trade tensions, the Paris Stock Exchange experienced a decline, closing down 1.2%. Wall Street followed suit with smaller losses. European markets are pressured by U.S. tariffs, particularly affecting the automotive sector. Counter-tariffs from Canada and Mexico, alongside China’s opposition, heighten concerns over a trade war. Investors are shifting to safer assets like gold, while cryptocurrencies face significant downturns. Political risks in France and mixed economic indicators further complicate the financial landscape.
Paris Stock Exchange Takes a Hit Amid Trade Tensions
The initial chill felt at the Paris Stock Exchange has somewhat subsided. After a steep decline of over 2% at the start, the Paris index ultimately closed down by -1.2%, landing at 7854 points. Noteworthy declines were seen in Stellantis, which fell by -4.4%, and Saint-Gobain, down by -4%.
Wall Street Follows Suit with Losses
Similar trends are evident on Wall Street, where indices began the day with a -2% drop. However, they managed to narrow their losses, with the S&P 500 down by -0.5%, the Nasdaq by -1%, and the Dow Jones by a mere -0.1%.
European markets are facing significant pressure due to tariffs initiated by Donald Trump, which are particularly hitting the automotive industry hard. The Euro-Stoxx index fell by -1.4%, while Frankfurt saw a -1.5% decrease, primarily due to a staggering -7% plunge in Daimler’s stock and a -6% drop for Volkswagen.
Investors are grappling with the implications of new tariffs imposed on Canada, Mexico, and China, raising fears of an escalating trade war. Trump has even suggested that Europe might be next in line for such measures.
In response to these tariffs, Canadian Prime Minister Justin Trudeau has imposed counter-tariffs of 25% on imports from the United States, covering items such as alcohol, clothing, and appliances. Similarly, Mexican President Claudia Sheinbaum has indicated that her country is preparing its own retaliatory strategies. China has firmly opposed the U.S. tariff actions and vowed to implement countermeasures to safeguard its interests.
Market participants are increasingly concerned that the U.S. and its trading partners’ tariff hikes could hamper the currently robust global growth. The potential for rising inflation is also in focus, leading to a 0.7% uptick in gold prices, which now sit at $2820, as investors shift from riskier assets to safer havens.
In the cryptocurrency realm, the situation is dire, with Bitcoin down by -4%, Ethereum plummeting -25%, and significant losses across other major cryptocurrencies as well, indicating heightened anxiety in the financial markets.
The Nikkei index mirrored this sentiment, dropping over 2.7% on Monday, contributing to a cumulative decline of 3.6% since the start of the year. The looming trade risks further complicate the delicate monetary policy landscape in the U.S.
Jerome Powell, the Fed chairman, chose to hold off on discussing potential rate cuts amidst the uncertainty surrounding the Trump administration’s policies. T-Bonds have benefited from this ‘risk-off’ sentiment, with the 10-year yield easing by -4.5 points to 4.522%. In Europe, OATs have dipped below the 3.150% threshold, while Bunds have erased -5.5 points, currently standing at 2.404%.
Political risks in France are also casting a shadow over stock markets, as the government, led by François Bayrou, invoked Article 49.3 to advance its budget proposal, putting it at risk of censure.
On a positive note, Trump’s initiatives have strengthened the dollar, which gained +0.6% against the euro, moving towards $1.03/E. In the oil sector, North Sea Brent saw a decline of 1.1%, settling at approximately $75.9.
From a statistical perspective, the HCOB PMI index for the eurozone’s manufacturing sector rose from 45.1 in December to 46.6 in January, marking an eight-month high and indicating a slower pace of deterioration.
Additionally, Eurostat’s quick estimate points to an annual inflation rate of 2.5% in the eurozone for January 2025, a slight increase from December’s 2.4% rate. Notably, after three months of decline, the HCOB PMI index for French manufacturing improved from 41.9 in December to 45 in January, indicating a significant slowdown in the sector’s contraction.
In corporate news, L’Oréal has announced a deal to sell approximately 29.6 million shares of Sanofi at a unit price of 101.5 euros, totaling around three billion euros, as part of its share buyback strategy. Meanwhile, Stellantis has unveiled plans to streamline its organization ahead of appointing a new CEO in the coming months. EssilorLuxottica has received FDA approval for the over-the-counter sale of its Nuance Audio Glasses in the U.S., along with CE marking and ISO certification for a European launch.