European stocks and currencies faced a significant downturn on Tuesday as market participants grew increasingly concerned about the potential impact of Donald Trump’s aggressive trade policies towards China under a possible second presidency.
The Stoxx Europe 600 index experienced its steepest decline since August, dropping 2 per cent. Major European indices reflected the widespread market anxiety, with Paris’s Cac 40 falling 2.7 per cent and Frankfurt’s Dax declining 2.1 per cent.
The US dollar strengthened against major currencies, with the dollar index rising 0.6 per cent against six key peers. Sterling depreciated 1.1 per cent to $1.273, whilst the euro weakened 0.5 per cent to $1.06, reaching its lowest point in twelve months.
Market sentiment deteriorated following reports that Marco Rubio, known for his hawkish stance on Iran and China, might secure the position of secretary of state in Trump’s administration. The prospect of Republican control over both houses of Congress has amplified concerns about aggressive tax cuts and substantial tariffs.
Trump’s proposed 60 per cent tariffs on Chinese imports and blanket duties of 10 to 20 per cent on other trading partners have sparked fears among European manufacturers. These companies face potential dual pressure from US tariffs and an influx of cheap Chinese imports redirected to European markets.
The commodities sector also reflected these concerns, with copper prices falling nearly 2 per cent in London trading. US Treasury yields increased as investors reassessed their expectations for interest rate cuts, with the benchmark 10-year yield climbing 0.12 percentage points to 4.43 per cent.
The dramatic market movements precede Wednesday’s US inflation data release, where economists anticipate consumer prices to show an increase to 2.6 per cent for October, up from September’s 2.4 per cent
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