European shares close at over 14-month low as trade war volatility grips markets

FRANKFURT: European shares slumped in a volatile session on Monday, with the STOXX 600 closing at its lowest since January 2024, as US President Donald Trump showed no signs of letting up in his aggressive trade war.

The pan-European STOXX 600 dropped 4.5%, down for the fourth straight session. Major bourses closed down between 4% to over 5%.

Trade-sensitive Germany’s benchmark index dove as much as 6.4%, at one point down more than 20% from its March all-time closing high and on track to confirm a bear market, though it pared some losses to close down 4.3%.

The volatility index leapt to an over three year high of 46.72.

A barrage of headlines kept investors on edge throughout the session. Stocks sharply pared losses after a report that Trump was considering a 90-day pause in tariffs for all countries but China. However, they retraced those gains after the White House called the report “fake news.”

All sectors were in the red, with European banks confirming a bear market, down over 20.9% from its March record high.

Investors also booked gains in shares of arms makers, which had surged earlier this year on prospect of higher defence spending, with defense stocks down over 5%.

“If the US catches a cold, the rest of the world catches the flu,” said Barry Knapp, managing partner, Ironsides Macroeconomics.

“It was foolish to think that you can hide out in foreign markets because (the US) is the biggest source of final global demands.”