Europe midday: Bonds, pharma stocks hit as Trump tariffs begin

(Sharecast News) - European shares slumped on Wednesday as US tariffs came into force, with the pharma sector now apparently in the sights of US President Donald Trump's trade policy, while a sell-off in US government bonds also heightened concerns among investors.

The pan-regional Stoxx 600 slid 2.92% in early deals to 472 points after a sell-off on Wall Street overnight. Germany's DAX was 2.39% lower and France's CAC-40 down 2.55%.

Meanwhile, the yield on benchmark 10-year US Treasury bonds rose by 0.12 percentage points on Wednesday to 4.38%, as investors called into question an asset class usually regarded one of the world's safest. The 30-year bond yield briefly surged above 5% to its highest since late 2023 and was last trading at 4.9157%.

Oil prices were also sharply lower, with Brent crude down almost 4% to $60 a barrel and West Texas Intermediate 4.08% lower at $57.

US stocks sank sharply again on Tuesday despite starting off the session with decent gains, after Donald Trump followed through on his threat to hike tariffs on China, sending the S&P 500 to its lowest close in 14 months.

Markets initially rose strongly as investors attempted to pick up bargains after three days of heavy selling, but newsflow from the White House erased all gains by the early afternoon, and resulted in yet another sell-off across Wall Street.

In late-afternoon remarks, the White House confirmed that levies on Chinese imports into the US would be raised to 104% - slapping an additional 50% tariffs on the duties already announced last week - in response to Beijing's retaliation against Trump's initial tariff barrage.

Trump on Tuesday suggested the US would soon announce "a very major tariff on pharmaceuticals," and tripled the previously announced rates on low-value packages exported to the American from China via the international postal system.

Pharma stocks fell on the news, with Roche, Novartis and Novo Nordisk all hit. Dutch mail-order drugs retailer Redcare Pharmacy plunged almost 16%

"What began as a stock market rout has mutated into a bond market crisis," said Chris Beauchamp, chief market analyst at online trading platform IG.

"The irresistible force of Trump's trade policy has hit the immovable object of the bond market. A continued surge in US yields has undermined any suggestion that Trump's tariffs on China are not causing major concern among investors around the globe."

"US borrowing costs are rising rapidly, piling the pressure on Washington to react in some way to alleviate the growing crisis in financial markets."

"Today's focus is on the Fed and the 10-year auction at 6pm - this has moved from an equity market crisis to a bond market one, which is far more serious. Liz Truss was forced back down in 2022 when the tensions threatened to blow apart the UK financial system - will Trump have to do the same?"

Reporting by Frank Prenesti for Sharecast.com