Global stock markets and stocks of European automakers fell on Tuesday as President Trump's broad tariffs on Canada, Mexico and China took effect.
European stocks fell as investors weighed the outlook for the world trade war after China and Canada quickly retaliated with their own tariffs. US futures show a slight drop in the S&P 500 after a 1.8% drop on the worst day of the year.
The Euro Stoxx 50 Index, made up of the largest companies in the Eurozone, saw its worst performance drop by 2.4% in about four months. The German benchmark index, DAX, fell by 2.6%, slashing almost all profits from the day before, reaching records on European military spending promises.
The German automaker and supplier shares were particularly violently attacked as they have an assembly plant in Mexico for vehicles sold in the US. Volkswagen shares fell by about 4%, while BMW shares fell by more than 5%. Daimler Truck, who owns the bus that built Freightliner and Thomas, skated over 6%. Continental, a manufacturer of auto parts that also produces in Mexico, fell 9%.
The US dollar index, which measures currency against baskets of other major currencies, is down 0.7%. The Canadian dollar hit a month's low against the dollar before winning nearly 0.5%.
However, the Mexican peso has weakened slightly against the US dollar, which is the fourth consecutive day of decline.
Oil prices also fell after the OPEC oil cartel, with some of its allies saying they would increase production on Monday. International benchmark Brent crude fell 1.6% to $70.47 a barrel.
As investors are wary of the US economic outlook, the 10-year Treasury yield that supports the borrowing costs of mortgages, credit cards and other charges has declined in recent weeks. Yields skated further on Tuesday.
Some European defense companies have made profits as the Commission proposed additional military spending, including measures to provide EU countries with 150 billion euros ($158 billion) of loans for defence investments. Shares of German arms maker Rheinmetall rose 1%, extending the 14% increase from the previous day. Shares of UK defense contractor BAE Systems rose 1% after 15% on Monday.
