Europe’s major equity markets fell yesterday, surrendering earlier modest gains as stocks on Wall Street slid over the emerging immigration and trade policies from the administration of US President Donald Trump.
Controversy over Trump’s divisive executive order to ban refugees and citizens of seven mainly Muslim countries had already sent markets into a tailspin on Monday.
But after recovering modestly earlier yesterday, European markets ended the session lower, pulled down by weaker prices in New York.
Trump economic adviser Peter Navarro bashed Germany for allegedly exploiting an undervalued euro to take advantage of its trading partners.
“The Trump administration appears to be targeting currencies as part of its goal of realigning global trade back in favour of the US worker,” said London Capital Group analyst Jasper Lawler.
“Trump’s team criticising the euro in the context of Brexit and populist candidates in upcoming European elections puts ‘eurozone breakup risk’ at the highest since the bloc’s inception,” he said.
Investors were also shying away from taking bets ahead of the rate-setting meeting of the US Federal Reserve later this week, analysts said.
“European markets attempted to stage a rebound, but gave in to timidity ahead of the Fed decision,” said strategists at the brokerage Aurel BGC.
London’s FTSE 100 closed 0.3% down to 7,099.15 points, the DAX 30 lost 1.3% at 11,535 and in Paris the CAC 40 was down 0.8% at 4,748.90 at close yesterday.
The Federal Open Market Committee (FOMC) will announce the outcome of its first policy-setting of the year today.
Trump’s executive order suspends the arrival of all refugees for a minimum of 120 days, Syrian refugees indefinitely and bars citizens from Iran, Iraq, Libya, Somalia, Sudan, Syria and Yemen for 90 days.
The resulting global outrage spooked investors, who fear the announcement could be a sign the tycoon will press ahead with many of his protectionist promises, overshadowing economy-boosting measures such as infrastructure spending and tax cuts – which had fuelled a rally in November and December.
“Trump is proving to be even more erratic and unpredictable than many feared,” noted XTB analyst David Cheetham.
All three main Wall Street indexes ended lower in Monday trade, while London, Paris and Frankfurt each lost around 1%.
Friday’s order was the latest controversial move by Trump in his first week, which also included a row with Mexico over trade and his proposed border wall, battles with the media over the crowd size at his inauguration and unsupported assertions that millions of people voted illegally in the 2016 election.
A trader works at the London Stock Exchange. The FTSE 100 closed 0.3% down to 7,099.15 points yesterday.
