As China Increases Stakes in Trade War, Stocks Decline – Europe Market Wrap

Global shares plummeted after China escalated its trade conflict with the US, raising new fears about tensions between Beijing and Washington at a time when stocks appear overvalued following a persistent rally.

S&P 500 contracts fell 0.7%, while Nasdaq 100 futures fell 0.9%, after China imposed restrictions on US entities linked to one of South Korea’s largest shipbuilders and warned more action. MSCI’s Asia index fell for a third day, marking its longest losing streak since August, while European equities fell 0.7%.

Tuesday’s developments represent the third day of market volatility, with concerns of an increase in US-China hostilities returning to the forefront. The S&P 500 has risen more than 30% from its April low, as initial trade concerns gave way to unwavering optimism about AI and the return of US interest rate decreases.

The yen outperformed other major currencies as Japan’s opposition groups considered challenging the long-ruling LDP. The Nikkei 225 fell up to 3.2%, while short-term rates fell on lower expectations of a near-term rate hike. Gold reversed earlier gains after briefly approaching $4,180 per ounce, while silver dipped after reaching a record high.

Investors’ attention is also shifting to the unofficial start of earnings season, with Goldman Sachs and Citigroup scheduled to report before the US open. This season, investors will seek reassurance on everything from the long-term viability of AI spending to the impact of higher tariffs.