European stocks slide as US-China trade war escalates

European stock markets reversed early gains to trade in the red, capping a turbulent week dominated by escalating trade tensions between the U.S. and China, which reignited fears of a global recession and shook investor confidence in U.S. assets.

European stocks slide as US-China trade war escalates

The STOXX 50 fell 0.9%, while the broader STOXX 600 slipped 0.6%. This sell-off reflected growing concerns about the long-term impact of the intensifying trade war, which has prompted investors to reassess their exposure to riskier assets. On Friday, China’s finance ministry announced additional tariffs of 125% on U.S. goods in retaliation to President Trump’s decision a day earlier to raise levies on Chinese imports to 145%, escalating the conflict to new heights. The prospect of a prolonged trade war has spooked investors, raising fears that a slowdown in global trade could lead to a broader economic recession. In Europe, the European Union temporarily suspended its planned retaliatory tariffs for a 90-day period, mirroring Washington’s move in an effort to foster dialogue and provide some breathing room for negotiations. However, the temporary truce did little to calm market nerves, as the broader global economic outlook remains uncertain. The heightened volatility has left investors on edge, particularly as they grapple with the potential consequences for European exports and the broader economic environment.

Equities performance

On the corporate front, Novartis shares rose 2.5% after the company announced a major $23 billion investment in the U.S., signaling confidence in the American economy despite the current geopolitical turmoil. This investment, which is expected to boost Novartis' presence in the U.S. healthcare market, was seen as a positive signal amid the broader market sell-off. However, Stellantis saw its stock decline by over 3% following a report showing a 9% year-over-year drop in first-quarter vehicle shipments, underscoring the challenges faced by the automotive sector in the face of weak consumer demand and supply chain disruptions.

Markets down in the entire week

For the week, both European benchmarks posted losses, with the STOXX 50 down 2.2% and the STOXX 600 falling 2.5%, reflecting the broader risk-off sentiment that has taken hold across global markets. With trade tensions showing no signs of abating and global growth concerns mounting, European stocks are likely to remain under pressure in the near term. Investors will be closely watching the next developments in the trade dispute, as well as any signs of policy responses from central banks and governments that could help stabilize the economic outlook.