European equity indices plummeted lower Monday, as escalating concerns about a global trade war raised recession fears, hitting the already weakened European economy hard.
At 04:40 ET (08:40 GMT), the DAX index in Germany dropped 6.8%, falling almost 1,500 points, the CAC 40 in France slipped 5.8% and the FTSE 100 in the U.K. fell 5.1%.
The pan-European STOXX 600 slumped 5.7%, down for the fourth straight session and on track for its steepest one-day percentage decline since the COVID-19 pandemic.
Trump backs his tariffs stance
The main European stock indices have continued last week’s selloff after U.S. President Donald Trump showed no sign of backing away from his tariff plans despite retaliation from China, and plans for the European Union to do something similar.
Trump said on Sunday that his trade tariffs were the only means to “cure” massive financial deficits with the likes of China and the European Union, and that they were here to stay.
China retaliated late last week, with the announcement of 34% additional tariffs on all goods imported from the U.S., and this week could see similar moves from the European Union.
The EU is considering imposing its first wave of retaliatory tariffs on around $28 billion worth of U.S. goods.
Goldman Sachs on Sunday lifted its odds of a 2025 recession to 45% from 35% a week ago, after hiking its recession forecast last week.
This followed JPMorgan last week raising the probability of a global recession this year to 60%, from a previous 40%.
European banks hit hard
The European banking sector was hard hit Monday, the third consecutive day of losses, triggered by escalating concerns over a trade war and a potential global recession.
The industry has been spooked by fears that a trade dispute could temper consumer confidence, reduce spending, weaken loan demand and pressure fees from advising on deals.
The Stoxx 600 Banks index dropped over 8% on Monday, marking a decline of over 20% from the recent peak — a move that signals entry into bear market territory.
Shares of Germany’s Commerzbank (ETR:CBKG) and Deutsche Bank (ETR:DBKGn) were both down over 10%, Spain’s Santander (BME:SAN) fell over 6%, while French banks Societe Generale (OTC:SCGLY) and Credit Agricole (OTC:CRARY) were also hit hard.
HSBC’s (LON:HSBA) stock fell over 5% in the U.K., after the Asia-focused banking giant slumped almost 15% in Hong Kong earlier in the day.
Elsewhere, Shell (LON:SHEL) shares fell more than 7% after the energy giant issued a first-quarter 2025 trading update that flagged higher upstream taxes and a sizeable working capital build, despite solid performances in gas and oil trading.
German industrial production falls
Sentiment was also hurt Monday after data showed that German industrial production fell more than expected in February, by 1.3% compared to the previous month, instead of 0.9% decline predicted.
The manufacturing sector in Europe’s biggest economy has been struggling for some time now, and the U.S. tariffs won’t make things easier with higher defense and infrastructure spending still months away.
