Fear of a transatlantic trade war has triggered a sharp market downturn at the German stock market at the start of the week. The bull market of the DAX has thus been temporarily put on hold. The German leading index plummeted in the morning, ending up around 2% weaker at 21,299 points and hit 21,370 points at midday. It had still reached an all-time high of around 21,800 points on Friday.
The reason for the setback on Monday was the far-reaching tariffs on goods from Canada, Mexico and China, which US President Donald Trump had imposed over the weekend. The auto sector in particular suffered greatly. Even second-tier German companies and European stocks were caught in the downdraft: while the MDAX fell by 2.09% to 26,173 points, the Eurozone’s EuroStoxx lost around 1.6% in value.
The opening of the US stock markets at the start of the week is being watched with bated breath in the US, as concerns are growing that the tariffs will again stoke inflation in the US and dispel hopes of interest rate cuts. According to the Manager Magazin, both the Dow Jones and the S&P 500 had enjoyed enormous climbs in the last two years to the delight of investors – the delight over Trump’s presidency had driven both indices to new record highs. Paul Ashworth, chief economist for North America at the analysis firm Capital Economics, is now pouring cold water on the situation:
“The inflationary impact of these tariffs and future measures will be more rapid and pronounced than we initially expected.”
The euro has started the week weak due to concerns over an escalating trade war between the US and other countries. The exchange rate dropped to 1.0141 dollars in the night of Monday, the lowest level since November 2022.
There were significant losses at the start of the week in the cryptocurrency market. Bitcoin, the oldest and most well-known cryptocurrency, held up relatively well, with its price on the Bitstamp trading platform ending at around 95,000 dollars – it had briefly reached 105,000 dollars on Friday. The loss was much more pronounced in the case of Ethereum, the second-largest cryptocurrency, which saw its price drop by a quarter to less than 2,500 US dollars, a decline of 10%.
It seems that the euphoria surrounding Donald Trump and Elon Musk has come to an end on the stock markets and in the cryptocurrency world for the time being. Gold, which is benefiting from the weak euro, remains a safe haven. On Monday, a new record high of 2,737.40 euros per ounce was set.