European Stocks Echo US Drop on Tariff Confusion: Markets Wrap

(Bloomberg) — European stocks followed Asia lower as US President Donald Trump’s shifting approach to trade tariffs whipped up market uncertainty and dented confidence in the economic outlook. Bitcoin slumped as details of a US strategic reserve left investors disappointed.

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Europe’s Stoxx 600 benchmark fell 0.5% after shares sank from Sydney to Hong Kong, with Japan’s Nikkei-225 Stock Average tumbling more than 2%. Futures for the S&P 500 pointed to small gains at the open after the benchmark tumbled 1.8% on Thursday. Treasuries ticked higher, while an index of the dollar fell for a fifth session, its longest losing streak in almost a year.

Geopolitical uncertainty and conflicting signals from the US about tariffs have whipsawed financial markets this week, putting the S&P 500 on track for its worst drop since September. Underscoring the growing risk aversion, Wall Street failed to stage a rebound even after Trump delayed levies on Mexican and Canadian goods covered by the North American trade deal.

“Confusion reigns around the Trump Administration policy agenda,” said Chris Weston, head of research for Pepperstone Group. “While there are few signs of panic, funds and fast-money accounts cut equity risk.”

As concern about tariffs shifts from their potential impact on inflation to the damage they may cause the economy, traders will get a snapshot of the labor market later Friday with US nonfarm payrolls data. Federal Reserve Chair Jerome Powell is slated to speak at a monetary policy forum in the afternoon.

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The back-and-forth on tariffs “is creating a lot of uncertainty and that is showing up not only in markets, which have become quite volatile, but also in forward looking leading indicators, such as surveys and purchasing managers indexes,” said Florian Ielpo at Lombard Odier. “For now the hard data remains good, but the soft data is deteriorating, and the question is which one is correct.”

In Europe, Germany’s historic shift toward ramping up defense spending has boosted local stocks and the euro, which is headed for its best week since 2009. At the same time, the prospect of more debt issuance hoisted yields on German bonds by the most since 1990. The rate on 10-year bunds were steady on Friday, dipping two basis points to 2.82%.