European markets are set to follow a broad selloff in Asia and the U.S. amid fears that U.S. President Donald Trump's plan to impose tariffs on steel and aluminum will prompt retaliatory measures from, among others, China and the EU.
European shares opened lower, with the FTSE 100 down 0.61%, Germany's DAX shedding 1.82% and France's CAC 40 falling 1.57% in morning trading. The Stoxx 600 of European stocks dropped 1.26%.
"[The planned tariffs have] raised concerns of countermeasures from China and the EU in response and is likely to see European stocks, which had already been struggling ahead of this weekend's Italian election and important SPD vote in Germany, follow stocks in Asia and open sharply lower over concerns that costs will rise and profit margins will get hit sharply," said Michael Hewson, chief market analyst at CMC Markets UK, in a research note.
Key Asian markets closed in the red March 2, led by Japan's Nikkei 225 Index falling 2.50%. Hong Kong's Hang Seng Index closed down 1.48% and China's Shanghai Composite Index finished 0.59% lower. Li Xinchuang, vice secretary-general of the China Iron and Steel Association, said the impact of the planned tariffs on China is "not big," Reuters reported, as Japan and South Korea await more details on the planned duties.
U.S. equities sank March 1, with the S&P 500 Index and the Dow Jones Industrial Average closing 1.33% and 1.68%, respectively.
"Yesterday we saw fairly solid economic data out of the U.S., along with a reaffirmation by Fed Chair Jerome Powell of his hawkish comments earlier in the week about the prospects for the U.S. economy which saw the U.S. dollar briefly hit six-week highs," said Hewson.
"These gains turned out to be rather fleeting due to a sharp turnaround in the wake" of the announcement of the planned tariffs, triggering concerns about the prospect of a trade war, he added.
