Europe midday: Stoxx slides as fears of US recession grow

(Sharecast News) - European markets were in the red on Tuesday after a sell-off on Wall Street overnight amid fears of a "Trumpcession" driven by US tariffs that could hit economic growth.

The pan-regional Stoxx 600 index fell 0.02% in early deals, with Germany's DAX was 0.7% higher and France's CAC 40 up 0.68%.

Global markets have been falling over fears that tariffs imposed by US President Donald Trump will fuel inflation and lead to a recession in the world's largest economy.

The S&P 500 fell 2.7%, the Dow Jones 2% and the tech-heavy Nasdaq 4% on Monday as investors dumped stock in the so-called "magnificent seven" - Alphabet, Amazon, Apple, Microsoft, Meta, Nvidia and Tesla.

Tesla's shares had their worst day in almost five years, falling 15% as investors worry about declining sales.

Trump started a trade war with America's three largest trading partners, increasing tariffs on China by 10% initially before lifting them to 20%. He planned 25% levies on Canada and Mexico but performed a u-turn two days after they came into effect but now claims he will still impose them next month.

"Markets are jittery and volatility seems like the only certainty while the White House pushes hard to usher in a new era, seemingly happy for stock markets to be collateral damage," said Hargreaves Lansdown analyst Matt Britzman.

Ipek Ozkardeskaya, senior market analyst at Swissquote Bank, said the tariff policy was hitting the US more than European peers, "because now we do have a massive budget being unlocked in the European economy".

"There is a growing conviction that the investments into the European defence and technology sectors are just going to rise massively."

Germany is trying to change debt rules to release billions in spending on weapons and related hardware. However, the Green party has said it would block military and infrastructure spending plans proposed by chancellor-in-waiting Friedrich Merz, unless measures include genuine support for climate policies and the economy.

There were signs of a compromise on Monday as the Greens tabled alternative proposals.

In equity news, shares in Swiss power company BKW slumped after annual results.

German arms maker Rheinmetall was higher on hopes of higher defence spending as talks started in Saudi Arabia between US and Ukraine officials on a ceasefire in the war with Russia.

Redcare Pharmacy surged after the company forecast 2025 sales above estimates. Volkswagen shares were up as the German auto giant targeted a 5% rise in revenue this year.

Galderma fell after shareholders offloaded a 6.3% stake in the Swiss skincare group.

Henkel sank as the German consumer goods and adhesives maker issue a softer forecast for 2025 organic sales growth.

Travel and leisure stocks fell on the back of Delta Air Lines lowering its quarterly outlook with shares in shares of Easyjet, Carnival, International Consolidated Airlines and InterContinental Hotels all lower.

Reporting by Frank Prenesti for Sharecast.com