Relations between China and the US are souring as the countries place fees on each other’s ships, worrying investors. The new front in the trade war comes despite President Trump’s claim on social media: "Don't worry about China, it will all be fine!”
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European stock markets opened in the red on Tuesday despite a Wall Street rally on Monday, when US President Donald Trump offered reassurances about Washington’s relationship with Beijing.
Despite the president's remarks, investor sentiment remains shaky as the world's two largest economies butt heads over trade.
Both nations will place fees on each other's ships on Tuesday, following a US investigation into China’s growing dominance in world shipbuilding. Washington will impose a fee of $50 per tonne (€43.27) of cargo on Chinese vessels in American ports, while China will charge 400 yuan (€48.65) per tonne, a levy that will steadily increase.
Also on Tuesday, Beijing imposed sanctions on five US-linked subsidiaries of the South Korean shipbuilder Hanwha Ocean as it seeks to assert its maritime dominance.
While the status of trade talks between China and the US remains unclear, Trump said he still may meet with Chinese leader Xi Jinping later this month on the sidelines of a regional summit.
Over the weekend, US President Donald Trump first threatened China with 100% tariffs, before stating in a social media post: "Don’t worry about China, it will all be fine! Highly respected President Xi just had a bad moment. He doesn’t want Depression for his country, and neither do I. The USA wants to help China, not hurt it!!!"
Aside from US-China trade tensions, investors in Europe also remain cautious as the new French government, led by Sébastien Lecornu, will address parliament at 15:00 CEST. Lecornu will seek to bring political stability to France by passing a budget to tackle the nation's heavy deficit.
Meanwhile, in the UK, a rise in unemployment, up to 4.8% in the three months to August, is fuelling concerns about the health of the UK economy.
European stock indexes and US futures are down
Just before midday in Europe, the FTSE 100 in London was down 0.38% at 9,406.64, the CAC 40 in Paris fell 0.76% to 7,874.20, and the DAX in Frankfurt lost 0.87%, coming to 24,176.42.
At the same time, the European benchmark STOXX 600 was down 0.71% and the IBEX 35 in Madrid was down 0.2% at 15,511.00.
In corporate news in Europe, Easyjet shares traded high after rumours of a potential takeover by shipping group MSC. Despite MSC denying the rumours, the low-cost carrier's shares were still up nearly 5% at midday.
“Investors will now think long and hard about who might want to own EasyJet. That explains why the shares are still trading higher despite MSC denying any involvement," said Dan Coatsworth, head of markets at AJ Bell.
Across the Atlantic, Dow Jones futures were down by 0.8%, S&P 500 futures lost 0.94%, while Nasdaq futures fell 1.23%. Meanwhile, rare earth companies in the US saw large gains as the trade dispute between the US and China intensifies. Among the biggest names in the US, Critical Metals jumped more than 33% in premarket trade by early afternoon in Europe. USA Rare Earth was up by 9% and MP Materials rose 6%.
In other dealings, the euro and the British pound weakened against the US dollar, while the Japanese yen notched up against the greenback.
Oil prices, meanwhile, tumbled. US benchmark crude fell more than 2% to $58.25, while international benchmark Brent slipped just below $62, losing around 2%.
Gold and silver prices skyrocketed as investors looked to safe-haven assets, with gold prices reaching $4,156.80, up by 0.58%. Silver futures hit a historic high above $52, before slipping to around $50.
Cryptocurrencies are losing ground sharply. Before noon in Europe, the CoinDesk Bitcoin Price Index (XBX) was down by 3.5% at $111,801, and Ethereum lost more than 6.4% as it traded at $4,006.49.
Global markets look ahead to earnings reports
Global market sentiment is clouded by fears of an AI bubble set to burst, as the valuations of tech companies have soared over the past months.
Critics say the US market now looks too expensive after prices rose much faster than corporate profits. Worries about a repeat of the 2000 dot-com bubble are raising the stakes for the upcoming earnings reporting season. JPMorgan Chase, Johnson & Johnson and United Airlines are some of the big names giving financial updates this week.
