European financial markets returned from the extended Easter weekend to a climate of apprehension on Tuesday, opening lower as simmering worries about global trade tensions and US economic policy uncertainty cast a shadow over investor sentiment.
The pan-European Stoxx 600 index reflected the cautious mood, shedding 0.5% by 8:27 a.m. London time.
The pullback was broad, affecting most sectors and all major regional stock exchanges.
Technology stocks felt the pressure most acutely, with the Stoxx Europe Technology index declining 1.7% in early trading, leading the regional losses.
Simmering trade tensions and Fed independence fears
Underpinning the negative start were persistent anxieties about the potential escalation of a global trade conflict.
Adding to the unease were threats from Beijing on Monday indicating potential retaliation against countries aligning with Washington’s calls to isolate China economically.
This geopolitical friction compounded concerns stemming from the US domestic front.
The European session followed a sharp sell-off on Wall Street Monday, which was largely attributed to President Donald Trump intensifying his public pressure campaign against Federal Reserve Chair Jerome Powell.
Trump, via posts on his Truth Social platform Monday, reiterated his view that the economy would falter without Fed interest rate cuts. In his latest salvo targeting Powell by name, he branded the Fed chief “Mr. Too Late” and a “major loser.”
This rhetoric follows earlier hints from Trump about Powell’s potential “termination” – an action without precedent.
Last week, White House economic advisor Kevin Hassett confirmed that the president’s team was actively studying the legality of such a move.
Powell, for his part, has maintained that he cannot be legally fired for policy disagreements and intends to complete his term ending in May 2026.
The standoff raises fundamental questions about the central bank’s independence, a cornerstone of market stability.
Global cues and upcoming focus
The cautious sentiment rippled across the globe, with Asia-Pacific markets trading subdued overnight, taking their lead from Wall Street’s decline.
Tuesday’s European calendar lacked major corporate earnings or significant economic data releases.
However, market participants are closely monitoring developments and commentary emerging from the IMF-World Bank Spring meetings currently underway in Washington.
Discussions at these high-level gatherings are expected to be heavily focused on the threats posed by, and the economic fallout from, President Trump’s global tariff regime.
Currency dynamics: dollar weakness persists
In the currency markets, the US dollar’s recent weakness continued to be a dominant theme, providing a lift to European currencies. By 7:08 a.m. London time, the euro had gained approximately 0.2% against the dollar, trading at $1.154.
The British pound saw an almost 0.3% rise against the greenback to $1.341, and the Swiss franc also edged 0.1% higher.
The dollar’s largely downward trajectory has been evident since the market volatility sparked by Trump’s “liberation day” tariff announcements earlier in the month, even though a 90-day pause was subsequently granted for most impacted countries.
This flight from the dollar and US Treasuries reflects deep uncertainty about American policymaking, with the dollar index having weakened by over 9% so far this year.
Market watchers anticipate further declines, a view echoed strongly by institutional investors.
According to Bank of America’s latest Global Fund Manager Survey, a net 61% of respondents expect the dollar’s value to fall over the next 12 months – marking the most pessimistic outlook among major investors in nearly two decades.
This currency shift presents both challenges and opportunities for global central banks navigating the current complex environment.
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