Stock Markets Sour On US Data, Trump Tariffs

European and US stock markets swooned into the red Monday on disappointing US economic data and news the US will reimpose tariffs against Argentina and Brazil.

Asian markets had been cheered earlier in the day by a surprise jump in Chinese factory activity, but the party ended with a tweet by US President Donald Trump.

Trump announced he would reinstate tariffs on steel and aluminum from the two South American countries, accusing the countries of "presiding over a massive devaluation of their currencies," which he said hurt US farmers.

"It doesn't take a genius to guess how investors reacted," said analyst Connor Campbell at Spreadex.

"Reversing their early gains, the eurozone indices all sank into the red, joined by an irritated Dow Jones," he noted.

Gregori Volokhine of Meeschaert Financial Services said Trump's move on Argentina and Brazil "rattled" the market because it directly linked tariffs to currency movements, a threat that Trump has previously floated with China but not acted on.

The tariffs were imposed last year due to national security concerns, but removed after Brasilia and Buenos Aires agreed to quotas.

"You can imagine where Trump might do the same thing against Europe because it let the euro weaken," Volokhine said.

Crude prices rallied after Iraq's oil minister said OPEC and other top producers could consider cutting output when they meet this week Getty Images North America / DAVID MCNEW

On Saturday, China said its manufacturing sector expanded in November for the first time in seven months, providing a boost to investors looking for signs of optimism in the world's second biggest economy.

But Volokhine said investors are unnerved because the US-China trade war remains "far from being resolved."

China's Global Times newspaper reported that Beijing wanted all US tariffs rolled back as part of a mini deal, a move observers said Washington is unlikely to agree to.

Relations between Washington and Beijing also have been strained after Trump signed a measure supporting pro-democracy protesters in Hong Kong. China retaliated by suspending US warship visits and vowed to sanction American NGOs.

In oil markets, crude prices advanced after Iraq said top producers might announce an output cut soon.

The remarks boosted expectations for a more aggressive move by OPEC at a Vienna meeting later this week.

Oil prices fell sharply on Friday on worries the Organization of the Petroleum Exporting Countries would simply maintain current production levels, despite a weakening global growth outlook.

On foreign exchange markets, the euro rose against the dollar after a survey revealed that the US manufacturing sector has contracted for a fourth straight month, which put more pressure on eurozone stocks because many companies would be hampered by the stronger single currency.