(Reuters) – European shares slumped to a two-month low on Thursday, with trade-sensitive Germany hit the hardest, as a fresh round of aggressive U.S. tariffs escalated a global trade war and stoked fears of an economic slowdown.
The pan-European STOXX 600 dropped 1.7% at 0712 GMT with German equities shedding 2.4%, the most among regional markets. Wall Street futures sank 3.1% as investors shed riskier assets in favour of safe-haven bonds and gold.
U.S. President Donald Trump’s move to slap a 10% tariff on most goods imported to the United States effectively raised the rate of levies on the European Union to 20% and China to 54%, with both trading partners vowing countermeasures.
Euro zone banks, sensitive to the economic outlook, dropped 3.1% as traders ramped up bets of interest rate cuts from the European Central Bank, even as the trade war threatened to stoke inflation.
The bank-heavy indexes in Italy and Spain fell 1.7% and 1.4%, respectively.
Defensive sectors such as utilities, food and beverages sector, real estate and healthcare eked out gains.
(Reporting by Medha Singh in Bengaluru; Editing by Savio D’Souza)
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