Stocks declined in Europe alongside S&P 500 futures as the latest salvos in the China-U.S. trade war renewed jitters in global markets. Havens were in demand, with 10-year Treasuries advancing with gold and the Swiss franc.
Declines in carmakers and bank shares pulled down the Stoxx Europe 600 Index, though the gauge rebounded from its session lows. US equity futures also pared an earlier loss, though still pointed to red at the open. In Asia, equities traded mixed after China extended retaliatory tariffs to cover more than two-thirds of imports from the U.S. on Saturday. With Beijing also reportedly preparing to warn on the risk of studying in America, Treasury 10-year yields fell to the lowest in almost 21 months, and JPMorgan Chase & Co. warned there’s more downside to come.
The Swiss franc reached its strongest versus the euro since 2017, while oil futures fluctuated.
Markets are still smarting from May, a brutal month for most asset classes except bonds, where fund managers sought out the relative safety of Treasuries. June began with no let-up in geopolitical risks, with China accusing the American government of resorting to intimidation and coercion in the now-stalled trade talks. Chinese officials are also planning action against “unreliable” foreign companies, with a list of violators pending.
Meanwhile, President Donald Trump’s tariff moves against Mexico last week sparked a wave of forecast revisions among economists and strategists. Traders are betting the Fed will cut its target rate by a half-percentage point by year-end, an outlook now matched by forecasts at JPMorgan and Natwest Markets. Morgan Stanley sees a recession in as soon as nine months if Trump puts 25% tariffs on the remainder of Chinese imports and China retaliates.