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Losses for stocks in Europe accelerated Wednesday, after China hit back against U.S. tariffs on its products. Beijing issued a list of 106 U.S. goods that will be subject to levies by the world’s second-largest economy.
Meanwhile, eurozone consumer prices picked up in March for the first time in four months, which should will reinforce the European Central Bank’s belief that it is on track to meet its inflation target.
How markets are moving
In Frankfurt, the DAX 30 DAX, -1.30% fell 1.2% to 11,853.77, and in Paris, the CAC 40 index PX1, -0.66% dropped 0.6% to 5,118.87.
Those moves helped drag down the broader Stoxx Europe 600 index SXXP, -0.82% by 0.8% to 366.02, led by losses for the technology and basic materials groups. On Tuesday, the index fell 0.5%.
Also, Spain’s IBEX 35 IBEX, -0.89% gave up 0.8% to 9,468.50, and the U.K.’s FTSE 100 index UKX, -0.47% lost 0.8% to 7,000.25.
The euro EURUSD, +0.0978% traded at $1.2305, down from $1.2271 late Tuesday in New York.
What’s driving markets
European stocks took another step lower during Wednesday’s session after China said it plans new tariffs of up to 25% on 106 U.S. products. Soybeans, airplanes and cars will be among the $50 billion in affected products. But China’s Commerce Ministry didn’t say when the levies will take effect.
China’s move comes after the Trump administration on Tuesday detailed the $50 billion of Chinese products it plans to hit with 25% tariffs unless Beijing makes major trade and investment concessions.
The export-heavy DAX 30 index in Germany was the hardest-hit of major European indexes as shares of auto makers fell. On Wall Street, Dow Jones Industrial Average futures YMM8, -1.88% at one point tumbled by more than 450 points after the Beijing tariff news, but have since recovered somewhat. S&P 500 futures ESM8, -1.43% and Nasdaq-100 futures NQM8, -1.85% were each down by more than 1%.
Worries about global trade war have persisted, after the Trump administration put global tariffs on imports of steel and aluminum, but then exempted most countries from those levies. But Trump’s targeting of Chinese goods has fanned the fears, as has the uncertainty about the future of the regional trade agreement between the U.S., Mexico and Canada.
Read: Here’s how a ‘trade skirmish’ could become a global ‘trade war’
What strategists are saying
“China has taken out big guns to answer Trump’s tariff — the trade war is here. Farmers over in the U.S. are going to be very nervous as China is planning to put tariffs on soft commodities such as soybeans. The commodity has taken a nose dive after the announcement,” said Naeem Aslam, chief market analyst at Think Markets UK.
“Your typical risk-off trade is in full swing as the dollar has dropped and the gold price has spiked. Traders have become more risk-averse as a result of these reciprocal tariffs, and we expect the risk appetite amidst traders to go lower,” he said in a note.
Stock movers
Car makers were under pressure as global trade tensions ramped up. Germany’s BMW BMW, -1.51% fell 1.2%, Daimler AG DAI, -1.57% fell 0.8% and Volkswagen AG VOW3, -2.02% gave up 1.3%. Fiat Chrysler Automobiles NV FCA, -2.47% was off 2.2%, following Wednesday’s jump of 7.3% after the company posted a 14% rise in March U.S. sales.
WPP PLC shares WPP, -1.07% WPP, +0.36% dropped 1.2% after the advertising heavyweight said it has appointed an independent counsel to investigate “an allegation of personal misconduct” against its longtime Chief Executive Martin Sorrell.
Economic data
Eurozone inflation rose to 1.4% in March, said Eurostat, the first pickup in prices in four months. In February, the unemployment rate in the region fell to 8.5%, its lowest level in more than nine years, meeting an analyst consensus estimate from FactSet.
Those developments that will reinforce the European Central Bank’s belief that it is on track to meet its inflation target over coming years.
In the U.K., business activity in the construction sector dropped in March following five months of marginal growth, IHS Markit said Wednesday. Its purchasing managers’ index for the construction industry fell to 47.0, down from 51.4 in February. A reading above 50 represents expansion.