The German stock market experienced a significant downturn Friday, triggering concerns about escalating geopolitical tensions and their impact on global markets. The DAX index closed at 24,241 points, marking a 1.5% decrease from the previous day’s close. This decline follows a morning of initial optimism that abruptly reversed, culminating in a deeper slide just before the market’s closing bell.
The catalyst for this market instability appears to be a renewed escalation in the US-China trade war. Shortly before 5:00 PM CEST, US President Donald Trump announced via his platform plans for further punitive measures against China, including a “massive increase” in tariffs on Chinese goods imported into the United States. He also indicated that a planned meeting with Chinese President Xi Jinping in South Korea will not proceed.
Trump’s accusations leveled against China relate to alleged plans to implement export controls on rare earth elements – a critical component in numerous technological applications. The President’s assertion of US dominance in this domain – “For every element they seize, we have two” – has been met with skepticism among some analysts, who point to China’s substantial control over the global supply chain of these materials.
The market reaction extended beyond equities, impacting energy prices. Natural gas prices fell to €32 per megawatt-hour, while Brent crude oil dropped sharply to $62.98 a barrel, representing a significant percentage decrease. These fluctuations underscore the sensitivity of the energy sector to geopolitical uncertainties surrounding international trade.
The euro, however, displayed relative strength, trading at $1.1621. While this provides a slight counterweight to the overall negative market sentiment, the underlying concerns surrounding the increasingly fraught relationship between the world’s two largest economies remain a major source of anxiety for investors. The abruptness of Trump’s announcement and the cancellation of the planned Xi Jinping meeting suggest a hardening of positions with potentially far-reaching consequences for global trade and investment. Market observers are now closely watching for further developments and assessing the potential for increased volatility in the coming days.