Trump Tariffs Weigh on Markets, Dow Drops 1.5%

Trump-led trade tensions, criticised by Canadian PM Trudeau, have pressured global markets, with the Dow dropping 1.5% and Brent crude hitting a six-month low. European bourses, however, are set to rebound as Germany unveils a €500 billion infrastructure fund and the EU proposes €150 billion in defense loans. Meanwhile, China's National People's Congress signals more fiscal stimulus, and Trump's address to Congress hints at scrapping a $52.7 billion semiconductor subsidy.

Equities

The FTSE 100 fell 1.3% on Tuesday, slipping from its all-time high in the previous session as trade tensions between the US and its key partners weighed on global sentiment. The FTSE 250 dropped 2.1%, marking its worst day of 2025 so far. UK sectors most sensitive to economic conditions, including travel & leisure, automobiles & parts, and energy, all declined by more than 4%.

Defence stocks ended a six-session rally, losing 0.6%. Meanwhile, UK Chancellor Rachel Reeves stated plans to accelerate defence equipment procurement, while the European Commission outlined an 800-billion-euro defence spending initiative.

Ashtead fell 8.2% after missing profit and revenue estimates, making it the worst performer on the FTSE 100. Greggs dropped 8.6% following a slowdown in sales growth and a warning that the year ahead would be challenging. Abrdn surged 7.7% after announcing a strategic overhaul and a name change to 'aberdeen'. Intertek climbed 4.5% after upgrading its margin expectations.

In the US, the S&P 500 fell 1.2% as new trade tariffs from the Trump administration unsettled investors. The Dow Jones dropped 1.55%, losing 670 points, while the Nasdaq slipped 0.35%, nearing correction territory with a 9.3% decline from its record high in December.

The 25% tariffs on imports from Canada and Mexico, alongside increased duties on Chinese goods, took effect on Tuesday. Retaliatory measures were announced by China and Canada, while Mexican President Claudia Sheinbaum signalled an impending response.

Shares in major US banks fell sharply, with Citigroup dropping 6.2% and JPMorgan Chase declining nearly 4%, dragging the broader banking sector index down 4.7%. Ford and General Motors, which rely heavily on North American supply chains, lost 2.9% and 4.6%, respectively.

Target fell 3% after issuing a weaker-than-expected full-year sales forecast, while Best Buy slumped 13.3% following a disappointing outlook. Walgreens jumped after reports emerged that Sycamore Partners was moving closer to a take-private deal for the pharmacy chain.

The CBOE market volatility index rose 3.2% to its highest level since December, as concerns over trade policies and economic growth weighed on investor confidence.

Forex & Commodities

The US dollar hovered near a three-month low as the latest tariffs from the Trump administration and retaliatory measures from Canada and China added pressure. The dollar index remained steady at 105.55 after falling 1.9% over the past two days, touching its lowest level since early December. The euro rose to $1.0637, its highest since mid-November, following news that German parties had agreed on a €500 billion infrastructure fund. Sterling held close to a three-month high at $1.2794.

Gold edged lower, with spot prices down 0.2% at $2,912.09 an ounce after rising nearly 1% on Tuesday. A modest rebound in the US dollar following Trump’s joint address to Congress dampened gold’s momentum. Treasury yields also increased, weighing on the metal’s appeal. Analysts expect gold demand to remain strong while trade uncertainties persist. Meanwhile, silver was flat at $32.00 per ounce, platinum was unchanged at $960.25, and palladium gained 0.8% to $949.05.

Oil prices declined for a third consecutive session as concerns over rising supply and trade-related economic risks weighed on sentiment. Brent crude fell 0.4% to $70.78 a barrel, hitting its lowest level since September. US West Texas Intermediate (WTI) dropped 0.9% to $67.65, reaching its weakest price since November. OPEC+ confirmed plans to increase production from April, marking its first output rise since 2022. Additionally, the US revoked a licence allowing Chevron to operate in Venezuela, putting 200,000 barrels per day of crude supply at risk.