As a cloud of darkness rolls across the Atlantic, the surprising power that marked the beginning of September is now replaced by a sense of fear.
Investors were unnerved on Tuesday by the twin ominous threats of an impending US government shutdown, and the latest salvo in Donald Trump’s trade war.
After the bell rang, most major sectors were in negative territory.
A mixed session was held in Asia, and a number of risks are threatening to upset a market already struggling under the burden of an historically low month.
Corporate casualties in the sea of blood
Risk-off was immediately felt in corporate life. The shares of Danish jeweler Pandora dropped 3.5 per cent in the early trading, which was a steep drop and sent the company down to the bottom Stoxx 600.
This sell-off came about after the announcement that Alexander Lacik will retire in March. It was a shocking news, which has brought uncertainty to one of Europe’s most recognized brands.
Tariffs, which are ever present in the market landscape, is the first thing that causes tremors of fear to spread across the broader markets.
On Monday, President Trump said that he will impose an initial tariff of 25 percent on kitchen cabinets, bathroom vanities and upholstered furnishings imported from other countries.
President Obama declared that these imports threatened the US economy, and undermined national security. This is a common justification to justify a decision that brings a new level of uncertainty into international trade relationships.
The Government is on the Brink
Second, the threat of a US government shutdown is growing.
The president’s high-profile meeting with top members of Congress at the White House Monday ended in an impasse.
After the meeting, JD Vance gave a pessimistic and grim assessment.
He said: “I believe we are headed for a shutdown, because Democrats will not do the right thing.” This statement has sent global markets into high alert.
Shutdowns do not usually move the market, but this time it feels different. Investors have been on high alert due to a slowing economy, rising stagflation risk, and inflated stock prices.
The prolonged shutdown would not only cause economic disruption, but it could also lead rating agencies to reconsider the credit status of the US. This was downgraded in May by Moody’s.
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