European shares experienced a notable downturn on Tuesday, retreating from recent record highs amid a widespread global sell-off. The catalyst for this market volatility was the implementation of U.S. tariffs on Canada, Mexico, and China, intensifying investor concerns about potential adverse impacts on global economic growth. The pan-European STOXX 600 index concluded trading 0.8% lower, marking its most significant single-day decline since August of the previous year.
Across the continent, all regional stock exchanges closed in negative territory, with Germany’s DAX index falling 1.6% from its record highs attained earlier in the week. The automobile sector bore the brunt of the sell-off, with Stellantis, BMW, and Porsche experiencing substantial losses. The automobiles and parts sector, in aggregate, plummeted by 3.4%, representing its largest single-day fall since March 2022. Financial services and banks also suffered notable declines, falling by 3.7% and 3.8%, respectively, while declining oil prices exerted downward pressure on energy stocks, which fell by 4.2%.
Investors are increasingly concerned that the European Union may become the next target of U.S. trade policy, particularly after President Trump floated the possibility of imposing a 25% duty on cars and other imports from the EU. The Euro STOXX volatility index surged to a high of 22.90 points, its highest level since August last year, reflecting the heightened uncertainty and risk aversion prevailing in the market.
