European stock markets commenced the trading week on a weaker footing Monday, retreating from recent gains as fresh tariff pronouncements from US President Donald Trump threatened to reignite global trade tensions.
The cautious sentiment permeated most sectors, with particular pressure on steel and automotive stocks, while investors also looked ahead to a pivotal interest rate decision from the European Central Bank later in the week.
The continent-wide STOXX 600 index was down 0.2% as of 0708 GMT, reflecting a broad-based pullback after a period of positive performance that saw the benchmark round off monthly gains in May.
The catalyst for Monday’s downturn was President Trump’s statement late on Friday, in which he announced plans to increase tariffs on imported steel and aluminum to a hefty 50%, up from the previous 25%.
This move immediately drew a response from the European Union, which stated it was prepared to retaliate, setting the stage for a potential escalation in trade disputes.
The impact of these renewed tariff threats was felt acutely in specific sectors.
European steel companies experienced a decline, with industry giant ArcelorMittal falling 1% and German conglomerate Thyssenkrupp dropping 1.1%.
The automotive sector, highly sensitive to import duties, also came under pressure, with the (.SXAP) index down 1.2%.
Auto stocks overall fell 1.4% amid fears that this latest development in the Trump tariff saga could lead to more stringent tariffs on vehicles, particularly following the US president’s unexpected announcement of the steel duty hike.
Risk-sensitive technology stocks also retreated, dropping 1%.
Corporate developments and market safe havens
Amidst the broader market unease, French pharmaceutical group Sanofi announced a significant acquisition.
The company agreed to buy US-based Blueprint Medicines Corporation, paying $129 per share, which represents an equity value of approximately $9.1 billion. Shares in Sanofi were slightly lower following the announcement.
As investors navigated the trade uncertainties, traditional safe-haven assets saw increased appeal.
Spot gold prices were up by around 1.5% ahead of the stock market open, trading at $3,337 an ounce – its highest level in a week.
This demand for gold may reflect investor concerns that President Trump could take even more aggressive tariff actions against specific countries and sectors, compounded by the escalating conflict in the Russia-Ukraine war.
Central Bank spotlight: ECB decision and key speeches awaited
Looking ahead, the major focus for the week will be the European Central Bank (ECB), which is scheduled to announce its interest rate decision on Thursday.
Market participants will be keenly awaiting any signals from the ECB regarding its monetary policy stance in light of the evolving economic and trade landscape.
Adding to the week’s significance, comments from both Federal Reserve Chair Jerome Powell and ECB President Christine Lagarde are anticipated.
These speeches will be closely scrutinized for insights into the central bankers’ views on inflation, growth, and potential policy responses.
A slew of economic data releases from the European trade bloc is also expected throughout the week, which will provide further context for market direction.
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