By Caroline Valetkevitch
NEW YORK (Reuters) -U.S. stocks were down sharply Monday afternoon after U.S. President Donald Trump said 25% tariffs on Canada and Mexico will go into effect on Tuesday and reciprocal tariffs will start April 2, while the euro strengthened after European leaders agreed to draw up a Ukraine peace plan.
U.S. indexes hit a session low after the tariff comments, with the S&P 500 last down more than 2%.
The dollar rose against the Mexican peso and the Canadian dollar following the tariff comments.
Trump also said there was “no room left” for a deal that would avert the tariffs. The Canadian foreign minister said the country was ready, if tariffs go ahead.
The euro was up 1.03% at $1.0481, while the dollar index, which measures the greenback against a basket of currencies, fell 0.65% to 106.61.
European leaders agreed at the weekend to draft a peace plan to present to the United States, following Ukrainian President Volodymyr Zelenskiy’s clash with Trump in the Oval Office.
“That’s certainly a positive for Europe because it’s unifying more of western Europe including Ukraine and drawing a line for the Russians, who have been very transparent that they want to recreate the old Soviet Union,” said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder in New York.
The European acknowledgement of the need to spend more on defense sent shares in European arms makers soaring.
Reuters reported that parties in talks to form Germany’s new government are considering setting up a defense fund.
U.S. economic data on Monday also weighed on stocks. It showed manufacturing was steady in February, but a measure of prices at the factory gate jumped to a nearly three-year high and materials deliveries were taking longer, suggesting that tariffs on imports could soon hamper production.
The Dow Jones Industrial Average fell 850.43 points, or 1.92%, to 42,997.96, the S&P 500 fell 132.23 points, or 2.22%, to 5,822.95 and the Nasdaq Composite fell 575.92 points, or 3.05%, to 18,273.23.
MSCI’s gauge of stocks across the globe fell 7.48 points, or 0.87%, to 855.47, while the pan-European STOXX 600 index ended up 1.07%.
Bitcoin was lower after surging over the weekend, when Trump raised the possibility of a new U.S. strategic reserve that would include a range of tokens.
Trump posted on Sunday on Truth Social that his January executive order on digital assets would create a stockpile of currencies, including bitcoin, ether, XRP, solana and cardano.
Trump provided no detail on how the fund would work, but it was enough to revitalize the crypto bulls, who had taken a serious knock last week.
“Trump just gave the pump that crypto traders have been holding out for,” said Matt Simpson, senior market analyst at City Index.
Bitcoin was down 7.6% from its high during Sunday.
Longer-dated U.S. Treasury yields were lower after the latest reading on manufacturing.
The yield on benchmark U.S. 10-year notes fell 6.4 basis points to 4.165%, from 4.229% late on Friday.
Also key this week will be the January U.S. payrolls report, due on Friday.
A recent spate of softer economic data has also nudged up expectations the Federal Reserve may be more active in lowering interest rates.
Markets are pricing in 65 bps in cuts by the Fed this year, up from previous bets for hikes totaling less than 50 basis points.
The European Central Bank is widely expected to cut rates when it meets on Thursday, although there is less conviction over what it might signal about the monetary policy outlook, given geopolitical factors.
(Additional reporting by Wayne Cole and Stella Qiu in Sydney; Editing by Edwina Gibbs, Emelia Sithole-Matarise, Susan Fenton, Richard Chang and Nia Williams)
Disclaimer: This report is auto generated from the Reuters news service. ThePrint holds no responsibility for its content.
