European shares plunged to a 16-month low on Monday as investors grappled with the possibility of a recession after sweeping tariffs announced by United States last week.
U.S. President Donald Trump showed no sign of backing away from the tariff plans despite retaliation from China, pushing investors to price in interest rate cuts by the European Central Bank and the Federal Reserve.
The pan-European STOXX 600 slumped 5.8% at 0722 GMT, after registering its steepest one-day percentage decline since the COVID-19 pandemic on Friday.
Trade-sensitive Germany's benchmark index dove 6.6%, among the worst hit, with Commerzbank and Deutsche Bank shedding 10.7% and 10%, respectively.
Arms makers, which had surged earlier this year on prospect of higher defence spending, were also knocked down on Monday. Tankmaker Rheinmetall dropped 23.7%, the most on STOXX 600, while Hensoldt, Rheinmetall and Renk fell between 17% and 21%.
U.S. President Donald Trump told reporters over the weekend that investors would have to take their medicine and he would not do a deal with China until the U.S. trade deficit was sorted out, sparking a fresh wave of selling in Asian markets.
Traders are now pricing ECB deposit rate at 1.70% in December from 1.75% on Friday and 1.9% last week before Trump's tariff announcement.
(Reporting by Medha Singh and Sukriti Gupta in Bengaluru; Editing by Mrigank Dhaniwala)
Copyright (2025) Thomson Reuters.
This article was from Reuters and was legally licensed through the DiveMarketplace by Industry Dive. Please direct all licensing questions to legal@industrydive.com.