The world stock markets significantly dropped at the start of the week due to the intense trade disputes which provoked a heightened finish down. In the Asian markets, all the indices took a sharp dip making Japan’s Nikkei crash by more than 6% and Hong Kong’s Hang Seng fall 9%, which were the most terrible trading days of the two markets in the last years. The investors suspected that the instability of the economy might last long.
Donald Trump’s announcement of a 25% tariff on a total of about 1800 goods from all countries has rolled the financial markets in the world. The list of the items that are affected is the widest in the world. This has led to a global trade war crisis, and the world exchanges have been in a state of panic for days.
The stock market indices on Wall Street’s futures went down on Monday morning, whereby Dow Jones was leading with the largest loss, amounting to nearly 1000 points. The S&P 500 and Nasdaq Composite also showed weaknesses. It was read as the concern by the investors about the real economic impact of the duties and its more general diffusion.
The US stock markets had not seen such a dramatic day since the COVID-19 crash, and the volume of $5 trillion that had been lost was the result. The biggest tech companies such as also faced a high percentage of losses like almost 35%. The Nasdaq also became one of them after the steep fall on Thursday.
It was learned that China reacted to the tariffs by imposing a tax of 34% on American goods. This decision has led to further hostility between the United States and China and was one of the factors leading to the plunging of the stock markets of those other countries on Monday.
The concerns about the weakening of fuel demand due to the possible slowdown of the economy have led to the oil price going under $60 per barrel. It is also because of this reason that gold has also seen significant sales as the safe-haven assets have sold off.
Financial analysts are of the opinion that should these tariffs continue to linger, it is quite probable that the US and world economies will face the threat of being tipped into recession. Furthermore, Jerome Powell, the Chair of the Federal Reserve, has also underscored that these policies might cause inflation to rise and growth to fall.
Not only the American but also the European markets took a hit as well. For one, the FTSE 100 and German DAX indices experienced dramatic plunges as the investors prepared for potential negative consequences of the trade disputes. Due to the unpredictability of the tariff talks, companies and governments are stuck trying to find a way out of the turmoil.
Many countries are looking for the possible solution to the situation and are engaged in a lively discussion regarding various concessions or the reduction of tariffs with the US. The choice of Japan and South Korea was a diplomatic solution, while China has responded very aggressively to the policies promoted by Trump.
Needless to say, the approaching earnings season only complicates matters further. Investors will be keen to see how companies are weathering the storm of economic uncertainty through their financial results as they set the tone for the next quarters. The key economic indicators to be announced later next week are believed to shed some light on the current global economic state.
Financial markets have recently witnessed the birth of analogies between this stock market crash and the previous global financial downturns, with experts asserting that in case the current trade standoff continues, a global recession would be inevitable. As political leaders struggle to steer their countries across the rocky reefs, the uncertainty still surrounds, and the anxiety of businesses and investors alike remains imminent.
