Thee S&P 500 lost 2.7pc, to end at 5,614.99 points, while the Nasdaq Composite lost 4pc, to 17,470.21. The Dow Jones Industrial Average fell 2.1pc, closing at 41,911.09.
The yields on US government bonds fell today as investors bought US debt after investors became less confidence in the stock market.
Bond yields fall as bond prices rise, which occurs when there is more demand.
Heading for its biggest one-day drop in almost a month, the yield on benchmark US 10-year Treasury notes fell to 4.221pc, from 4.318pc late on Friday.
Will Compernolle, macro strategist at FHN Financial, said: “If the occupant in the White House is himself not terribly optimistic about short-term growth expectations, why should the market be optimistic about it?”
Donald Trump’s slogan that the US needs to put “America first” is knocking confidence in the US, an analyst has said.
Kathleen Brooks, research director at broker XTB, said: “Trump is putting his political goals ahead of the strength of the US economy and the stock market.
“This is the playbook of President Xi in China and President Putin in Russia, who have both put politics in front of economic growth in recent years. This has had major repercussions for their economies.
“Trump may think that he is steering the US economy in a healthy direction, but this is worrying the broader financial markets. Trump’s flip flopping on tariffs, and his old-fashioned views of America first, is weighing on consumption and knocking confidence.”
Shares of Tesla are still sliding this evening as confidence in Elon Musk’s electric car company disintegrates following a post-election “Trump bump”.
Tesla shares fell 15.2pc, to $222.82. That is the lowest Tesla shares have traded since late October, reflecting investors’ newfound pessimism as the carmaker’s sales crater around the globe.
Many analysts have blamed Tesla’s sagging stock, and car sales, on Mr Musk’s support of Donald Trump and other hard-Right candidates around the world.
The US stock market’s sell-off is worsening this evening, and it is heading toward its worst day since 2022 after investors were spooked about the state of the American economy under Donald Trump.
The S&P 500 is down by 3.2pc, the Dow Jones Industrial Average is down 2.5pc, and the Nasdaq Composite is 4.7pc lower.
It comes after the US president was asked over the weekend whether he was expecting a recession in 2025. Mr Trump told Fox News: “I hate to predict things like that. There is a period of transition because what we’re doing is very big. We’re bringing wealth back to America. That’s a big thing.”
He added: “It takes a little time. It takes a little time.”
The US and China are discussing holding a “birthday summit” in June, the month that both Donald Trump and Xi Jinping were born.
The Wall Street Journal reported that sources said this could easy the path for enable formal trade talks to begin.
The Magnificent Seven group of US technology stocks plunged today, going further down than the market as a whole.
Falls include Tesla at 13.9pc, Nvidia at 5.4pc, Amazon at 3.5pc, Microsoft at 3.8pc, Apple at 5.7pc, Google owner Alphabet at 5.2pc and Facebook owner Meta at 5.5pc.
European shares fell to their lowest in nearly a month on Monday. It came as investors dumped tech shares around the world as uncertainty around US tariffs showed no signs of abating.
The pan-European Stoxx 600 was down 1.3pc, after the benchmark index snapped a 10-week winning streak on Friday.
Technology shares were the biggest losers on the index, down 3.1pc at their lowest level since late January, as rapid shifts in US trade policy and growth concerns in the world’s largest economy left investors wary.
The tech-heavy Nasdaq in the US fell more than 4pc to a near six-month low.
Steve Sosnick, chief market analyst at Interactive Brokers, said: “A lot of investors globally are reassessing their risk. Tech is bearing the brunt of it because when there is profit taking or de-risking going on, the most active stocks get hit the hardest.
“Aggressively cutting back government spending and potentially adding tariffs … it’s understandable why investors are showing more growth fears.”
Banks and the industrial goods sector, that includes defence stocks, fell 2.7pc and 2.1pc respectively. Both sectors had rallied recently, after Germany’s bumper fiscal package and prospects of higher defence spending in the region.
Germany’s Greens vowed to block plans by likely next chancellor Friedrich Merz for a massive increase in state borrowing, but left room for compromise on measures to revamp the military and revive growth.
This led to some concerns over the German plan to set aside €500bn (£388bn) for infrastructure investments over 10 years.
Analysts at Deutsche Bank said that failure to pass the proposed reform would severely limit the scope of a fiscal expansion in the next four years, undermine the next government’s credibility and cause political fragmentation in Germany.
A sell-off across US markets has continued as investor sentiment soured amid growing fears that the world’s largest economy is facing a recession.
The mood spilled over into the FTSE 100 on Monday which dropped 0.9pc, to close at 8,600.22.
It follows a week of turbulence for global stock markets, in which investors have tried to digest the impact of US tariffs on Canada, Mexico and China.
Over the week, American President Donald Trump made policy, then reversed it, including temporarily halting tariffs on Canada and Mexico on Thursday.
On Wall Street, the S&P 500 had plunged 2.3pc by the time European markets closed, and Dow Jones was down 1.2pc.
Dan Coatsworth, investment analyst at AJ Bell, said: “The US market sell-off is starting to look ugly.
“Many people have been worried about elevated valuations among US equities for some time and looking for the catalyst for a market correction.
“A combination of concerns about a trade war, geopolitical tensions and an uncertain economic outlook could be that catalyst.”
In Frankfurt, Germany’s Dax index suffered another sharp decline on Monday, closing 1.7pc lower. In Paris, the Cac 40 fell 0.9pc.
Elon Musk’s social media platform X was down for users around the world on Monday on a brutal day for the tech billionaire.
The network, formerly known as Twitter, appeared to suffer three major outages in Britain and the US, according to the tracking site Downdetector.
Mr Musk wrote: “There was (still is) a massive cyberattack against X.
“We get attacked every day, but this was done with a lot of resources. Either a large, coordinated group and/or a country is involved.”
Investors have been pulling the parachute cord on riskier positions in their droves amid a widespread selloff on Wall Street.
Ed Yardeni, president of Yardeni Research, said traders were seeking more risk averse portfolios and divesting from overweight holdings as recession fears caused stocks to tumble.
He said: “It’s getting harder to make out the shape of the economy through the fog of Trump 2.0’s firings and tariffs. No wonder the stock market’s default position is risk-off and stocks have been correcting.”
Ross Mayfield, investment strategist at Baird, said investors were blinking first as Trump appeared to hold firm.
He said: “The Trump administration seems a little more accepting of the idea that they’re OK with the market falling, and they’re potentially even OK with a recession in order to exact their broader goals. I think that’s a big wake-up call for Wall Street.
“There had been a sense that President Trump kind of measured his success on stock market performance, there was even somewhat of a ‘Trump put’ so to speak, and I think we’re seeing that’s not the case, so the market is starting to reflect that reality.”
Fabio Bassi of JPMorgan said his team had turned “tactically cautious on risk assets,” because of “the increase in policy uncertainty over the past couple of weeks, the volatility around a potential Russia/Ukraine ceasefire, and the unprecedented new information around the German/EU fiscal plans”.
Hedge funds have been unwinding their positions aggressively, with the highest proportion of traders betting against the market since 2019, according to Goldman Sachs.
A key economic adviser to President Donald Trump has pushed back on talk of recession stemming from uncertainty caused by an escalating trade war.
In an interview with CNBC, Kevin Hassett, who heads the president’s National Economic Council, said there were many reasons to be bullish about the US economy.
Mr Trump’s tariffs on Canada, China and Mexico were already having the intended effect of bringing manufacturing and jobs back to the United States, he said.
“There are a lot of reasons to be extremely bullish about the economy going forward. But for sure, this quarter, there are some blips in the data,” Mr Hassett said, saying those stemmed from both timing effects of Trump’s rapid-fire tariffs push and some of what he called “Biden inheritance.”
It came as the New York Fed’s monthly Survey of Consumer Expectations, released today, concluded: “Households expressed more pessimism about their year-ahead financial situations in February, while unemployment, delinquency, and credit access expectations deteriorated notably.”
The percentage of households expecting the jobless rate to be higher a year from now rose to its highest since September 2023.
Meanwhile, the Atlanta Federal Reserve’s closely followed GDP Now tracker suggests the economy could contract in the first three months of the year.
Mr Hassett said that would be a “very temporary phenomenon,” driven largely by a historical tendency to hold off on investment after a big election. This tendency should be resolved this month, and tariff uncertainty should be resolved in April, he said.
The leader of Ontario has threatened to turn off electricity exports to 1.5m Americans if Donald Trump continues to escalate its trade war on Canada.
Doug Ford said that the Canadian province is now charging 25pc more for electricity exports to Minnesota, New York and Michigan.
“I will not hesitate to increase this charge. If the United States escalates, I will not hesitate to shut the electricity off completely,” he said.
“Believe me when I say I do not want to do this. I feel terrible for the American people who didn’t start this trade war. It’s one person who is responsible, it’s President Trump.”
Mr Ford said Ontario’s tariff would remain in place despite the one-month reprieve from Trump, noting a one-month pause means nothing but more uncertainty.
Mr Ford’s office said the new market rules require any generator selling electricity to the US to add a 25pc surcharge. The tax “will be used to support Ontario workers, families and businesses.”
Bloomberg has reported that New York imported about 4.4pc of its electricity from Canada in 2023, and lower percentages for Minnesota and Michigan.
Wall Street’s “fear gauge” surged 14pc today after traders were spooked by Donald Trump’s trade war and its potential to put the US into recession.
The “fear gauge” – officially the CBOE Volatility Index – has risen by around 50pc this quarter so far and is heading for the biggest quarterly rise since the start of 2020, when the spread of Covid caused economic carnage.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “Unease about the effect of Trump’s tariffs hangs over financial markets at the start of the week.
“The prospect of a recession in the US is lurking, with consumer confidence falling, companies facing increasing trade complexity and investors turning more nervous.
David Morrison, senior market analyst at Trade Nation, said: “Risk sentiment has soured as investors react to President Trump’s various tariff announcements and as the US economic outlook begins to cloud over.”
Global stocks measured by MSCI fell 1.9pc after touching a near two-month low as investors worried about an economic slowdown after Donald Trump did not rule out a tariff-related recession.
Investors started seeking safety after Mr Trump talked in a Fox News interview about a “period of transition” while declining to predict whether his tariffs on China, Canada and Mexico would result in a US recession.
Robert Pavlik, senior portfolio manager at Dakota Wealth in Connecticut, cited concerns around tariffs including Mr Trump’s interview as key factors behind Monday’s mood on the markets.
He said: “When [Mr Trump] says there’s going to be pain felt he’s telling you this may not be short term in nature. This may not be a negotiation tactic.
“Tariffs create a bunch of uncertainties around costs, inflation and economic growth. You don’t know the end game and you don’t know the goal. How do you plan for that? How do you buy a stock for the future when you don’t know what the future holds?”
The FTSE 100 has fallen nearly 0.8pc to a one-month low as the effects of a trade war and pessimism about the US economy weigh down on global markets.
Chris Beauchamp, chief market analyst at online trading platform IG, said: “The weakness in US markets is making itself felt in Europe, and the FTSE 100 in particular is taking a beating, dropping to a one-month low.
“Banks and mining companies have driven the slump, offsetting a good day for utilities and consumer staples like Unilever.
“Last week’s key feature was the resilience of Europe versus US weakness, but as the stimulus story fades it is clear that the region’s indices can’t decouple entirely from Wall Street.”
European markets were helped last week amid expectations that Germany would significantly boost spending on defence and infrastructure under its new government.
Tesla shares plunged by more than 9.5pc in trading this afternoon amid a growing backlash against its boss Elon Musk.
Investors are worried that the billionaire’s vocal support for Donald Trump and hard-Right causes could permanently tarnish the Tesla brand.
The shares, which are down 32pc over the past month, have more than wiped off all their initial gains after Donald Trump election.
It comes after Tesla revealed that sales in January collapsed across the UK, EU and European Free Trade Area, by more than 45pc. In China, sales fell 11.5pc, but its main competitor, BYD, saw a 48pc increase.
At home, sales in California – which was historically seen as Tesla’s strongest market – dropped 12pc last year.
Jacob Falkencrone, of Saxo Bank, said in an analyst note: “Elon Musk’s political controversies are becoming a liability – Tesla’s brand favourability is at an all-time low, and his polarising views are alienating core customers, particularly in environmentally conscious markets.”
He added: “Investors are increasingly uneasy about Musk’s divided focus – he’s balancing leadership roles across Tesla, SpaceX, Neuralink, and now his controversial government role within the Trump administration.
“Some analysts now view Musk as a risk factor rather than an asset, as Tesla’s market valuation remains extremely high compared to traditional automakers.”
Bitcoin dropped to its lowest value since November after Donald Trump failed to woo investors at the inaugural Crypto Summit at the White House last week. The cryptocurrency fell up to 6.5pc to dip below $80,000 on Monday before paring most losses. Other crypto stocks such as Ether and MicroStrategy slid 1.2pc and 10pc respectively.
Traders continued to express disappointment at the announcement that the US crypto reserve – which White House officials have billed as a “digital Fort Knox” – would be funded by digital coins and tokens previously seized in criminal cases rather than from purchasing new cryptocurrencies.
Jeff Park of Bitwise crypto investment group said Trump’s executive order had been “symbolic” but lacked guarantees.
He wrote on X: “We all know Trump is a transparently transactional person. He recognised that bitcoin, whether he believes in it or not, symbolised the ethos of his political capital and capitalised its base to the max to win the office… we asked for too little.”
He added: “Promises were made, but the market is not sure if promises were kept, though the one thing for sure is that now Trump is off the hook.”
One of Wall Street’s biggest banks has downgraded its outlook for US growth after Donald Trump raised recession fears.
Goldman Sachs said it was projected the American economy would expand by 1.7pc this year, down from its previous estimate of 2.4pc expansion.
It said the forecast, which is the first it has delivered below the wider market consensus in two and a half years, was a result of the Trump administrations efforts to manage expectations about the impact of his tariff policies.
The US president warned on Sunday that the world’s largest economy faces a “period of transition” as he implements tariffs against America’s closest allies and China.
Mr Trump has signalled he will announce “reciprocal” tariffs against economies he thinks are taking advantage of the US on April 2.
Goldman Sachs analyst Jan Hatzius said: “The reason for the downgrade is that our trade policy assumptions have become considerably more adverse and the administration is managing expectations towards tariff-induced near-term economic weakness.
“We now see the average US tariff rate rising by 10pp this year, twice our previous forecast and about five times the increase seen in the first Trump administration.”
On that note, let me thank you for following these updates on the markets and global trade so far. My colleague Alex Singleton is jumping into the blogging hot-seat now.
Donald Trump’s tax cuts will accelerate the exodus of British companies to the United States, a leading trade group has warned, potentially dealing a fresh blow to the London Stock Exchange.
Duncan Edwards, the chief executive of BritishAmerican Business (BAB), said the US president’s pledge to slash corporation tax will encourage even more UK-listed businesses to shift their operations to America.
He said: “As companies are thinking about whether to increase their exposure in the US from an operating perspective, I think that will also include looking at where they’re listed.
Big Tech stocks and companies that rode the artificial-intelligence frenzy in recent years have slumped sharply on Wall Street.
Nvidia fell another 5.1pc today to bring its loss for the year so far to 22.6pc.
It is a steep drop-off from its nearly 820pc surge over 2023 and 2024.
Elon Musk’s Tesla fell 8.9pc to deepen its loss for 2025 so far to more than 40pc and send its market valuation below $800bn.
The car maker was initially given a post-election bump over hopes that Mr Musk’s close relationship with the US president would help the electric-vehicle company.
However, the stock has since slumped over worries that its brand has become intertwined with Mr Musk amid protests against the US government’s efforts to cull its workforce.
The pound rose as traders shifted away from the dollar over concerns that tariffs could set off an economic slowdown in the US.
Sterling was up 0.2pc to $1.294, having climbed more than 3pc against the US currency so far this year, while the euro continued its upward trend after rising 4pc against the dollar last week.
Investors fear a looming “Trumpcession” after the US currency plunged to a four-month low last week despite intensifying market anxiety.
The move ran contrary to typical market behaviour, where the US currency usually gains during extremes of US outperformance or recession, known as the “dollar smile”.
Mr Trump has put the theory to the test by initiating long-threatened trade wars and backing away from the alliance with Ukraine – breeding market uncertainty, spurring defence spending plans and fuelling inflation.
Rupert Thompson, chief economist at Kingswood Group, said: “The hope had been that Trump’s bark on tariffs would be worse than his bite but recent actions suggest this is not the case.
“It had been thought that a decline in US stocks would reign in Trump’s more damaging policy inclinations but he seemed to accept last week that some economic pain might be needed to achieve longer term gain.”
Themistoklis Fiotakis of Barclays said Trump’s lurch to isolationism had been poorly executed, presenting a watershed moment for Europe.
He said: “The fundamentals of the Trump plan were supposed to add to underlying structural bullish dollar dynamics.
“But the execution has left less fiscal space and has triggered powerful responses from policy partners.”
He added: “It is clear that Europe has finally taken the message clearly – derisking from the US requires substantial resource commitment.”
Elon Musk’s social media platform X was down for users around the world on Monday on a brutal day for the tech billionaire.
The network, formerly known as Twitter, appeared to suffer two separate outages in Britain and the US, according to the tracking site Downdetector.
Users around the world faced a blank screen when trying to log onto the site this afternoon, pushing them onto rival platform Bluesky.
Mike Payton wrote: “Twitter has gone down twice today. Might be hanging out here all day.”
The technical issues for X come as its owner, Mr Musk, faces pressure over his role in Donald Trump’s administration.
He has been enacting sweeping cuts to US federal budgets under his Department of Government Efficiency, known as Doge.
Official figures on Friday showed there were 10,000 fewer people on federal payrolls last month, although the full impact of Mr Musk’s changes have yet to be felt.
Meanwhile, the share price of electric vehicle maker Tesla, where Mr Musk remains chief executive, plunged by 6pc on Monday after UBS cut its forecast for its first-quarter deliveries.
It also lowered its price target on the stock.
The main stock markets on Wall Street plunged at the start of trading after Donald Trump warned the US economy faces a “period of transition”.
The Dow Jones Industrial Average dropped by 0.9pc to 42,415.06 while the benchmark S&P 500 sank by 1.4pc to 5,687.93.
The tech-heavy Nasdaq Composite plummeted by 2.1pc to 17,823.65 after a 5.9pc decline in Tesla after a broker gave a weak forecast for the electric car maker.
The White House’s economic adviser said he expects the US economy to have grown in the first quarter despite the global trade turmoil.
Kevin Hassett said predicted uncertainty about President Donald Trump’s trade policies to be resolved in early April.
Mr, Hassett, who heads the National Economic Council, told CNBC there were many reasons to be bullish about the US economy.
Mr Trump’s tariffs on Canada, China and Mexico were already having the intended effect of bringing manufacturing and jobs back to the United States, he said.
Donald Trump’s US administration “does not seem to be engaging” in talks with the European Union to avert tariffs, the bloc’s trade commissioner Maroš Šefčovič has said.
He told reporters in Brussels:
I travelled to the US last month, seeking a constructive dialogue to avoid the unnecessary pain of measures and countermeasures.
Shares in the world’s largest shipping broker sank by nearly a fifth after it warned that the shipping market was being marred by global conflicts, trade tensions, and tariffs.
Clarksons, which is listed on the London Stock Exchange, said 2025 had started with even more uncertainty than previous years, amid new tariff plans introduced by US president Donald Trump.
It said rates charged by shipping companies have fallen since the start of the year as a result, which has brought down the value of deals.
The wars in Gaza and Ukraine “underscore the importance and fragility of global supply chains”, chief executive Andi Case said, with some 1,300 ships around the world subject to sanctions.
This has led to a significant changes in terms of the movement of energy and resources around the world, driving the biggest increase in tonne miles – which measures the movement of cargo – in the sector for 15 years.
The company plunged nearly 19pc to the bottom of the FTSE 250 as it also flagged the impact of disruption to trade routes across the Red Sea following attacks on ships that began towards the end of 2023.
Traffic through the Suez canal remained at historically low levels in 2024, Clarksons said, although conditions in the Panama canal eased.
The company nonetheless reported an pre-tax profit of £112.1m for 2024, up slightly on the previous year, with its broking division bolstered by an increase in commodity trade and amid higher shipping costs last year.
“The geo-political outlook remains uncertain as we enter 2025, with ongoing regional conflicts and trade tensions creating uncertainty for markets reflected by freight rates and asset values currently lower than 2024,” Mr Case said.
The UK’s flagship stock index has ticked downwards amid lingering uncertainty over the prospect of a US recession.
The FTSE 100 slide around 0.7pc, putting it on track for a fifth straight session of declines.
Tom Essaye of The Sevens Report said: “The reason stocks are dropping is the spike in uncertainty and fear that the uncertainty will lead to a whole host of negatives.
“All of that uncertainty will cause consumers and businesses to essentially hole up and wait for clarity.”
British pharmaceuticals giant AstraZeneca weighed down the index, dropping as much as 3.6pc, as fellow drugmaker Novo Nordisk fell as much as 6.5pc in Copenhagen – the most since December – on the back of disappointing clinical trials for its next-generation obesity shot.
Entain, the betting giant behind Ladbrokes and Coral, fell as much as 5.5pc after swallowing a £461m post-tax loss last week – driven by £876m in impairment charges related to regulatory changes and elevated competition.
Unilever propped up the index with a rise of 1.4pc as investors appeared to buy into new chief executive Fernando Fernandez’s optimism.
The stock has risen steadily since the new boss’s first public appearance at a Barclays fireside chat last week, in which he hinted at bold acquisitions on the horizon, set out a vision for trimming inefficiencies and revealed he was “very bullish” about the long-term prospects of India.
Elsewhere, Shell and BP were buoyed by oil prices holding steady as the threat of sanctions on Iranian oil exports offset pressure from US tariff uncertainty and rising output from Opec+ producers.
Donald Trump is an “agent of chaos and confusion” who is hurting US growth prospects in the years to come, according to a top economist.
Holger Schmieding of Berenberg Bank said the president’s “zigzagging on tariffs shows that he has little idea of the potential consequences of his tariff policies”.
Mr Schmieding said the downturn in the US may not be as severe as some fear but warned of the impact of Mr Trump’s shifting polices on tariffs.
“I don’t think we will talk about a US recession,” he told CNBC’s Squawk Box Europe.
“The US economy is resilient, I would say, largely despite Donald Trump.
“US consumers have money to spend, [and] they probably will. The labour market in the US remains reasonably firm, and with energy prices coming down a bit and probably some tax cuts and deregulation coming, I don’t think there’s an imminent recession risk.
“But what is becoming ever clearer in the long run, Trump is hurting US trend growth, that is growth in the years beyond 2026.
“And he stands for higher prices for US consumers, which means, in my view, the Fed has no reason to cut rates with Trump as president, and Trump sowing chaos and confusion.”
Morgan Stanley has warned that America’s benchmark stock market could fall heavily by the middle of the year amid uncertainty about Donald Trump’s tariff policies.
The Wall Street bank said the S&P 500 could drop another 5pc to 5,500 points by mid-year, having already slumped 1.9pc so far in 2025, down more than 6pc from its peak in February.
However, Morgan Stanley still thinks the index will end the year at around 6,500, which would be 12.7pc higher than its last close.
Strategist Michael Wilson said: “The path is likely to be volatile as the market continues to contemplate these growth risks, which could get worse before they get better.”
Donald Trump has done more damage than “even the most pessimistic would have imagined possible” during the first weeks of his second US presidency, according to Telegraph readers.
Here is a selection of views from the comments section below and you can join the debate here:
HSBC has downgraded its rating on US stocks over the uncertainty created by Donald Trump’s shifting tariff policies.
The bank advised investors to be “neutral” on Wall Street stocks, down from its previous guidance to be “overweight”, according to Reuters.
It came as the lender raised its rating on European stocks, excluding the UK, after Germany announced its €500bn fund for defence and infrastructure spending.
HSBC strategist Alastair Pinder said: “It is important to stress that we are not turning negative on US equities – but tactically, we see better opportunities elsewhere for now.”
US stock indexes are on track to fall at the opening bell today amid worries over the health of the American economy.
The tech-heavy Nasdaq 100 is on track to slump 1.9pc while the S&P 500 was down 1pc in premarket trading. The Dow Jones Industrial Average was 0.9pc lower.
The Nasdaq has fallen nearly 6pc so far this year while the benchmark S&P 500 has dropped nearly 2pc.
It comes after Donald Trump warned the US economy is in a “period of transition”, following after warning signs from employment figures on Friday.
US nonfarm payrolls increased by 151,000 in February, which was less than expected by analysts.
Investors will next be watching US inflation figures, due for release on Wednesday, for any signs of weakening in the American economy under President Trump.
Enrique Diaz-Alvarez, chief economist at Ebury, said: “While this report stabilised the dollar after its dramatic weekly fall, it could not get a rebound going, as US stocks continue to underperform those of the rest of the world in an apparent no confidence vote on Trump’s policies.
“February inflation should be the economic focus this week, but news on tariffs, the war in Ukraine or frankly any other random occurrence in Trump’s social media timeline may well overshadow it.”
European shares dropped after a mixed trading session in Asia as uncertainty persisted over what President Donald Trump will do with tariffs.
Germany’s Dax lost 0.8pc, while the Cac 40 in Paris declined 0.4pc as European banking stocks were hit by expectations of interest rate cuts from the world’s largest economy.
Banks fell as much as 2.3pc while defence stocks, which have lately benefitted from higher defence spending prospects, gave up their early gains to fall 0.3pc.
European Union finance ministers were set to discuss how to pay for defence through new joint borrowing, existing EU funds and a greater role for the European Investment Bank.
German leaders agreed last week to overhaul state borrowing rules to boost defence spending and set aside €500bn (£420bn) for infrastructure investments over 10 years.
The Federal Reserve is expected to cut interest rates three times by the end of the year, money markets indicate after Donald Trump raised recession fears for the US economy.
Traders have priced in three reductions in borrowing costs, having priced in two on Friday before the US president said the world’s largest economy was going through a “period of transition”.
Fed chairman Jerome Powell also acknowledged on Friday that the outlook for the US did not appear to be smooth sailing.
He said: “The path to sustainably returning inflation to our target has been bumpy, and we expect that to continue.”
The value of the pound slipped amid the concerns about the US economy as investors moved into bonds.
Sterling was 0.1pc lower against the dollar at $1.29, with the UK currency weighed down by a decline in bond yields.
Investors are moving out of riskier assets into the safety of bonds amid concerns about the health of the US economy, which President Donald Trump said was in a “transition”.
The pound was down 0.3pc against the euro, which is worth 84.1p, as the single currency is supported by surging bond yields amid Germany’s defence and infrastructure spending plans.
The FTSE 100 dropped as Donald Trump’s trade war hangs over markets.
The UK’s flagship stock index was last down 0.5pc amid the looming prospect of a recession in the US.
Mohit Kumar, chief UK economist at Jefferies, said: “US economic data has been surprising to the downside and has raised concerns over a recession.”
The midcap FTSE 250 dropped 0.4pc having earlier risen as much as 0.4pc.
China and Hong Kong stocks closed lower as mounting deflationary pressures heightened concerns over the country’s economic recovery amid escalating trade tensions with the US.
China’s blue-chip CSI300 Index ended 0.4pc lower, while the Shanghai Composite Index lost 0.2pc. Hong Kong’s benchmark Hang Seng slipped 1.9pc.
China’s consumer price index (CPI) in February missed expectations and fell at the sharpest pace in 13 months.
Oil prices have fallen back towards their lowest level since September after Donald Trump’s warning about the US economy and fears about weak growth in China.
Brent crude, the international benchmark, was trading close to $70 a barrel, with US-produced West Texas Intermediate at $67 after seven weeks of declines.
President Trump warned on Sunday that the US economy faces a “period of transition”, days after Federal Reserve chair Jerome Powell said there had been a rise in uncertainty about the outlook for the American economy.
Meanwhile, fresh figures today raised fresh concerns about the prospect of deflation in China.
Consumer inflation fell in February by 0.7pc compared to a year earlier, the National Bureau of Statistics said.
The drop was by more than expected and put inflation below zero for the first time in 13 months.
Zhiwei Zhang of Pinpoint Asset Management said: “China’s economy still faces deflationary pressure. Domestic demand remains weak.”
Chinese tariffs on a range of US fruit, vegetables and other pantry staples took effect today but locals at a lively Beijing market largely shrugged off the escalating trade war.
The levies of 10pc and 15pc on American agricultural products, which also include meat, grains and cotton, were imposed after US President Donald Trump raised a blanket tariff on all Chinese goods to 20pc last week.
Vendors in a down-town market said they were not worried about sales despite the potential for higher prices at the check-out.
“If prices go up, folks won’t eat imported stuff,” a fruit seller, surnamed Shi, told AFP.
“There will be more domestic goods sold, and I think this is something folks can accept.”
Shi’s offerings – from bananas and strawberries to durian and mangosteen – come from all around the world, but he said fruit grown within China typically sells better.
He Yulian, who was visiting her daughter in Beijing, said she was indifferent about the trade war.
She said she cared only about quality, not where a product was from.
“For regular folks, if we can tell something is imported from the United States, we can try to buy less of it – or not at all,” the 65-year-old from Shanxi said.
Stock markets in London began the week higher despite Donald Trump’s warnings about the US economy.
The FTSE 100, which is considered a relatively stable market in times of turmoil, rose 0.1pc to 8,688.15.
The midcap FTSE 250 gained 0.4pc to 20,206.53.
In contrast to the US, Japan’s benchmark bond yield hit a 17-year high amid expectations its central bank will keep raising interest rates.
The yield climbed to a high of 1.58pc after official figures showed the fastest gain in pay more three decades.
The figures support expectations the Bank of Japan will keep gradually increasing interest rates to keep inflation under control.
“There’s already some expectations that the BOJ may raise rates earlier than expected, and people are starting to think that the policy decision in May will not be smooth-sailing,” said Takashi Fujiwara of Resona Asset Management.
The decline in US Treasuries is in stark contrast to what has happened in Europe over the past month.
While US bond yields have dropped, the returns on European sovereign debt have surged after Germany announced its plans for a €500bn fund to invest in defence and infrastructure, ripping up the fiscal rules of the largest economy on the Continent.
The benchmark 10-year US Treasury yield has dropped nearly 22 basis points (bps) over the last month to 4.28pc.
Meanwhile, the equivalent German bund yield has rocketed 48 bps higher to 2.84pc. The 10-year UK gilt is up 18 bps to 4.64pc over the same period.
Two-year US Treasury bond yields, which are more susceptible to changes in the outlook for interest rates, have plunged 30 bps over the last month to 3.98pc, while the German bund yield has gained 21 bps to 2.23pc. The tw-year UK gilt yield was up nearly 7 bps to 4.19pc.
Donald Trump said the US economy faces a “period of transition, because what we’re doing is very big”.
“We’re bringing wealth back to America. That’s a big thing,” he told Fox News in a wide-ranging interview where he also said Ukraine “may not survive”.
“What I have to do is build a strong country. You can’t really watch the stock market.”
He added: “If you look at China they have a hundred-year perspective”.
Bond market traders are ramping up bets on a US recession amid fears Donald Trump’s tariff trade war will hammer American growth.
The yield on two-year US Treasury bonds slipped back below 4pc in Asian trading hours overnight after the US president said on Sunday that the world’s largest economy faces “a period of transition.”
The comments echoed words used by Treasury Secretary Scott Bessent on Friday, who has talked about his desire for falling US bond yields – a benchmark for government borrowing costs.
The returns offered to investors in the short-dated bond have dropped sharply since mid-February amid the US president’s tariff war against allies and China.
Traders have piled into the safe-haven asset amid growing expectations that the Federal Reserve will have to cut interest rates to support the economy.
“Recession risk is definitely higher because of the sequence of Trump’s policies – tariffs first, tax cuts later,” said Tracy Chen, a portfolio manager at Brandywine Global Investment Management told Bloomberg.
President Trump said on Sunday that the US economy faces “a period of transition,” echoing words used by Treasury Secretary Scott Bessent on Friday.
The benchmark 10-year yield fell three basis points to 4.27pc.
“Just a couple of weeks ago we were getting questions about whether we think the US economy’s re-accelerating —- and now all of a sudden the R word is being brought up repeatedly,” said Gennadiy Goldberg, head of US interest rate strategy at TD Securities told Bloomberg.
“The market’s gone from exuberance about growth to absolute despair.”
Thanks for joining me. Bond traders are increasing bets on a US recession as Donald Trump’s trade war deepens.
The US president said on Sunday that the world’s largest economy faces “a period of transition”.
The yield on two-year Treasury bonds has fallen sharply since mid-February amid increasing bets that the Federal Reserve will have to cut interest rates to support the economy.
“Recession risk is definitely higher because of the sequence of Trump’s policies – tariffs first, tax cuts later,” said Tracy Chen, a portfolio manager at Brandywine Global Investment Management told Bloomberg.
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Shares in Hong Kong and Shanghai sank on Monday after data showing Chinese consumer prices slipped back into deflation stoked fresh concerns over the world’s second-largest economy.
Hong Kong stocks, which have surged 20pc this year to a three-year high, lost more than two percent at one point and Shanghai ended off 0.2 percent.
There were also losses in Singapore, Taipei, Bangkok and Jakarta, although Tokyo, Sydney, Seoul, Wellington, Mumbai and Manila rose.
Beijing’s tariffs on certain US agricultural goods in retaliation for Donald Trump’s latest hike on Chinese imports came into force this morning.
