Nasdaq Plunges 4% as Tesla Halves Amid Trump Tariffs

The Nasdaq fell 4%, its steepest drop in two-and-a-half years, while Tesla shares have halved since post-election peaks, driven by new tariffs from Donald Trump. Bond yields fell sharply, markets priced in a 50% chance of a Fed rate cut in May, and Citi downgraded US stocks to "neutral." Asian markets attempted to stabilize after initial losses, while the yen reached a five-month high and the euro remained steady despite German political tensions.

Equities

The FTSE 100 fell 0.9% on Monday, reaching its lowest level in nearly five weeks as concerns over US tariffs and economic growth weighed on investor sentiment. This marked the fifth consecutive session of declines for the index. The FTSE 250 dropped 1.3%, hitting its lowest close since January. Defence stocks fell 4.5%, giving up previous gains linked to expectations of increased military spending.

Shipping services company Clarkson saw its shares slump by 20.3% after warning that geopolitical uncertainty would affect its near-term outlook. Healthcare real estate investment trust Assura rose 14.3% after confirming it was considering a £1.61 billion takeover offer from US private equity firms KKR and Stonepeak Partners. Deliveroo gained 0.8% after announcing plans to exit its Hong Kong operations and sell some assets to Delivery Hero’s foodpanda.

In the United States, the S&P 500 lost 2.7%, closing below its 200-day moving average for the first time since November. The Nasdaq dropped 4%, its biggest single-day decline since September 2022, and has now fallen more than 10% from its December high, confirming a correction. The Dow Jones Industrial Average fell 2.08%, shedding 890 points. HSBC downgraded US stocks, citing tariff uncertainty, while bond yields fell as investors sought safety.

Technology stocks saw the steepest losses, with the sector falling 4.4%. Tesla plunged 15.4%, marking its worst single-day drop since September 2020, after CEO Elon Musk’s recent job cuts at the Department of Government Efficiency and political controversy in Europe. Coinbase and MicroStrategy, both linked to bitcoin prices, fell 17.6% and 16.7%, respectively, as cryptocurrency markets weakened.

Market volatility increased, with the CBOE Volatility Index closing at its highest level since August 2024. Investors also reacted to the risk of a US government shutdown as lawmakers struggled to agree on a new spending bill. China’s retaliatory tariffs on US imports took effect, while new US tariffs on base metals are expected later this week.

Forex & Commodities

The Japanese yen reached a five-month high of 146.55 per dollar before settling at 147.24, as investors shifted towards safe-haven assets. The US dollar index remained flat at 103.8, struggling to gain despite significant equity market losses. Sterling held above its 200-day moving average at $1.2875, while the euro remained stable just above $1.08. The Australian dollar hovered around its 50-day moving average at $0.6266. China’s yuan rose 0.2% to 7.2426 per dollar, while the Canadian dollar and Mexican peso strengthened despite new US tariffs.

Gold rose 0.4% to $2,901.13 an ounce, supported by a weaker dollar and falling US Treasury yields. US gold futures climbed 0.2% to $2,905.70. Investors are awaiting US Consumer Price Index (CPI) data, due on Wednesday, to gauge the Federal Reserve’s next move on interest rates. Spot silver added 0.3% to $32.21 an ounce, while platinum and palladium both fell 0.1% to $956.63 and $942.10, respectively.

Brent crude edged up 0.3% to $69.46 a barrel, while US West Texas Intermediate rose 0.1% to $66.12. Oil prices had fallen earlier on concerns over a potential US recession and the impact of tariffs on demand. OPEC+ is monitoring the market and may adjust output increases if prices remain below $70 per barrel. Russian Deputy Prime Minister Alexander Novak confirmed that planned production increases from April could be reversed if market conditions deteriorate.