Global financial markets experienced a sharp downturn on Monday morning, triggered by renewed trade threats from former US President Donald Trump. The ripple effect was felt from Asia to Europe, casting a shadow over what was meant to be a celebratory day for the City of London.
Reeves Withdraws as Markets React to Trump's Ultimatum
Chancellor Rachel Reeves pulled out of a planned appearance at the London Stock Exchange, an event designed to mark a "new golden age" for the UK's financial sector following the FTSE 100's recent surge past 10,000 points. The Treasury confirmed her withdrawal as markets opened lower.
Reeves is instead scheduled to attend a press conference with Prime Minister Sir Keir Starmer at Downing Street, where the impending US tariffs are expected to be discussed. The London Stock Exchange event proceeded without her, led by LSE chief executive Julia Hoggett, with the traditional ticker tape shower marking the market opening.
Market Falls and the Greenland Tariff Threat
The sell-off was sparked by an announcement from Donald Trump on Saturday. He threatened to impose tariffs of up to 25% on eight European countries, including the UK, Germany, France, and Denmark. The stated condition for lifting these tariffs is that the US must be allowed to purchase Greenland.
Trump outlined a plan for a 10% tariff starting on 1 February, applying to all goods sent to the United States, with an increase to 25% slated for 1 June if his demand is not met.
European Indices Slide as Investors Seek Safety
The immediate market reaction was pronounced. In London, the FTSE 100 index fell by 0.4% in early trading, following overnight declines in Asian markets. The retreat mirrored a broader European slump as investors moved capital into perceived safe-haven assets like gold and silver.
Other major European indices also tumbled:
- France's CAC 40 dropped 1.6%
- Germany's DAX was down 1.4%
- Spain's Ibex 35 fell nearly 1%
Analysts at Deutsche Bank offered a note of caution, referencing previous tariff announcements that were later softened. "There will be hundreds of different opinions on how this will all pan out but remember that the tariffs announced on 'liberation day' were ultimately softened a week later," they stated. However, they warned that "as it stands the tariff threats are real, and would be economically and geopolitically damaging."
With US markets closed for Martin Luther King Jr. Day, the full reaction from Wall Street will be delayed until Tuesday, leaving European investors to gauge the initial impact alone.
