European stock market volatility index hits seven-month high
An index of fear in Europe’s financial markets has hits its highest level since last August.
The Euro Stoxx Volatility index, which uses options pricing to measure market expectations of future volatility, has risen by almost 5% this morning to 23.8 points, a seven-month high.
The index has almost doubled since mid-December, when it dipped below 14 points, as investors have grown more nervous about the economic outlook.
China’s decision to impose retaliatory tariffs on US agricultural imports today (see earlier post) has highlighted the risks of a global trade war.
Analysts at Principal Asset Management have warned that escalating trade tensions are injecting fresh volatility into markets, adding:
The U.S. trade deficit, which remains sizable with key partners like China, Mexico, and Europe, underscores the stakes in ongoing trade disputes. However, while tariffs could increase costs and disrupt supply chains, history suggests that markets adapt over time.
A well-diversified portfolio remains the best defense against short-term uncertainty. Investors should avoid overreacting to short-term swings and instead focus on economic resilience, corporate earnings strength, and broader market trends.
Last week the VIX index, which tracks fear levels on Wall Street, hit its highest level since last December, as the early market enthusiasm following Donald Trump’s election victory subsided.
Vishwanath Tirupattur, global head of quantitative research at Morgan Stanley, says the mood has changed rapidly, telling clients:
Market sentiment has shifted quickly from post-election euphoria and animal spirits to increasingly serious concern about downside risks, driven by ongoing policy uncertainty and a spate of uninspiring ‘soft’ data. The macro markets now expect the Fed to pivot from fretting about inflation to worrying about growth. Market pricing of rate cuts in 2025 has swung from about one cut a few weeks ago to three cuts today.
he pricing of the terminal rate has also moved notably lower, with its arrival much sooner. After reaching an all-time high just a few weeks ago, the S&P 500 has given up all its gains since the election and then some, in line with our US equity strategy team’s outlook for a tougher first half and a 5,500-6,100 trading range due to slower growth.
Key events
Lloyd’s of London forecasts $2.3bn losses from LA wildfires
Insurance market Lloyd’s of London has estimated that the Californian wildfires that ravaged Los Angeles in January will cost it aroudn $2.3bn.
Lloyds has released the estimate alongside its a trading update for 2024, which show it made an underwriting profit of £5.3bn last year, down from £5.9bn in 2023, while pre-tax profits fell to £9.6bn from £10.7bn.
Burkhard Keese, Lloyd’s CFO, says:
“2024 saw us maintain our focus on strong profitability and disciplined growth. Our market has delivered another excellent underwriting year for our investors, while providing best in class solutions for our customers to protect their business flows and balance sheets.
“We would like to extend our deepest sympathies to those affected by the California fires earlier this year. Although we are still assessing the full impact, we do not expect this to be a capital event.”
The total cost of the wildfires will be much higher, though – there were estimates in January that the total insured losses could exceed $20bn, with the total losses forecast to exceed $135bn.
After a shaky start to the year, UK consumer confidence bounced back in February, reports polling company YouGov.
The YouGov/Centre for Economics and Business Research consumer confidence index, just released, increases by 1.4 points in February, up from 111.1 to 112.5.
That takes it back to levels set in December:
YouGov reports:
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However, Britons were less optimistic about household finances for the year ahead (-1.4), and workers more worried about job security (-0.5) compared to January 2025
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Business activity measures for past 30 days (+2.0) and next 12 months (+1.2) rise
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Outlook for house prices rises (+5.2), as do retrospective measures (+1.6)
Sam Miley, managing economist and forecasting lead at Cebr, says:
“Despite the headline YouGov/Cebr Confidence Index improving, consumers also reported some areas of concern. Notably, households’ views of their financial situation over the coming year have returned to negative territory.
This is likely a driver of the weak consumption levels we are seeing across the economy, despite ongoing improvements in real wage growth. Instead, consumers are opting to save at a higher rate and act more cautiously.”
Wall Street futures signal more losses ahead today
Wall Street is on track to fall when trading begins, in under three and a half hour’s time.
Investors may be in a less cheerful mood, after Donald Trump failed to rule out his trade policies causing either a recession or higher inflation in the US.
The Dow Jones industrial average is on track for a 0.95% fall, acccording to the futures market, with the S&P 500 being called down 1.2%.
Wall Street patience with the White House may be running thin, after Trump told Fox News yesterday that there will be “a period of transition” as his policies kick in.
RBC Capital Markets’ head of U.S. equity strategy research, Lori Calvasina, says:
“Strong postelection vibes were an important part of the bullish consensus on 2025 for U.S. equities which hasn’t panned out.”
After years battling deflation, policymakers in Japan are starting to worry that inflation may be a growing problem.
Private-sector members of a key Japanese government panel called for vigilance to the risks of rising inflation hurting the economy today, as the country’s long-term government bond yields surged to 16-year highs.
The Council on Economic and Fiscal Policy (CEFP) said that policymakers should watch out for the risks of food inflation dampening private consumption and of a potential surge in interest rates hurting the outlook for investment, adding:
“Vigilance is required that such risks could potentially reverse the ongoing economic recovery.”
They should also be mindful of how increasing interest payments on government debt would affect public finances, they added.
AJ Bell: $1.57trn wiped off value of the Magnificent Seven so far this year
Concerns that Donald Trump may damage the US economy have hurt US mega-tech companies this year.
Since the start of 2025, $1.57trn has been wiped off the value of the “Magnificent Seven” tech stocks so far this year, reports brokerage AJ Bell.
Nvidia, Tesla, Amazon, Microsoft, Apple and Alphabet have all fallen in value, leaving Meta as the only company worth more than at the end of last December.
Dan Coatsworth, investment analyst at AJ Bell, says:
“Tech stocks rallied when Donald Trump won the 2024 US presidential election on hopes of less stringent regulation. The euphoria around his return to the White House has now fizzled away, with all the S&P 500’s gains wiped out. That’s dampened investor sentiment in general.
“The dollar, as benchmarked by the trade-weighted DXY index, is down 5.4% from January’s peak, to erase the gains forged after the presidential poll.
“Investors are beginning to realise that Trump’s policies might have negative consequences, even for people in the US where the prospect of recession is now being talked up. A trade war is unsettling and there are far-reaching consequences if it blows up.
“We’ve seen a rotation into other areas such as cheap(er) stocks in the UK and Europe, and more defensive areas in the US like healthcare are getting their moment in the sun. Even China is attracting more attention as investors keep their fingers crossed for more government stimulus measures to prop up the economy.
“Investors have been sitting uncomfortably when it comes to the US and that’s made them look closer at their portfolios to consider if changes are needed. It’s natural to look at the areas that have previously done well and consider if it is time to lock in gains.”
The US dollar is slipping today, down 0.15% against a basket of major currencies.
That takes it close to the four-month low touched during trading on Friday.
The “Trump Bump” risks becoming the “Trump Slump” across financial markets. Dollar index dropped to the lowest since US elections due to recession fear. pic.twitter.com/NRS1G04ixT
— Holger Zschaepitz (@Schuldensuehner) March 10, 2025
In happpier news, investor morale across the eurozone has brightened substantially this month.
The monthly index of eurozone investor confidence from the Sentix research institute has risen this month, to -2.9 in March from -12.7 in February
Economic expectations have hit their highest reading since July 2021, as investors are cheered by Germany’s plan to issue more debt to fund defence spending.
As Sentix puts it:
“For Germany, investors are downright euphoric.”
European stock market volatility index hits seven-month high
An index of fear in Europe’s financial markets has hits its highest level since last August.
The Euro Stoxx Volatility index, which uses options pricing to measure market expectations of future volatility, has risen by almost 5% this morning to 23.8 points, a seven-month high.
The index has almost doubled since mid-December, when it dipped below 14 points, as investors have grown more nervous about the economic outlook.
China’s decision to impose retaliatory tariffs on US agricultural imports today (see earlier post) has highlighted the risks of a global trade war.
Analysts at Principal Asset Management have warned that escalating trade tensions are injecting fresh volatility into markets, adding:
The U.S. trade deficit, which remains sizable with key partners like China, Mexico, and Europe, underscores the stakes in ongoing trade disputes. However, while tariffs could increase costs and disrupt supply chains, history suggests that markets adapt over time.
A well-diversified portfolio remains the best defense against short-term uncertainty. Investors should avoid overreacting to short-term swings and instead focus on economic resilience, corporate earnings strength, and broader market trends.
Last week the VIX index, which tracks fear levels on Wall Street, hit its highest level since last December, as the early market enthusiasm following Donald Trump’s election victory subsided.
Vishwanath Tirupattur, global head of quantitative research at Morgan Stanley, says the mood has changed rapidly, telling clients:
Market sentiment has shifted quickly from post-election euphoria and animal spirits to increasingly serious concern about downside risks, driven by ongoing policy uncertainty and a spate of uninspiring ‘soft’ data. The macro markets now expect the Fed to pivot from fretting about inflation to worrying about growth. Market pricing of rate cuts in 2025 has swung from about one cut a few weeks ago to three cuts today.
he pricing of the terminal rate has also moved notably lower, with its arrival much sooner. After reaching an all-time high just a few weeks ago, the S&P 500 has given up all its gains since the election and then some, in line with our US equity strategy team’s outlook for a tougher first half and a 5,500-6,100 trading range due to slower growth.
Analysts at investment bank Jefferies remain optimistic about the prospects for the US economy in the second half of 2025 – while also fearing that it may slow more than expected in the first half of the year.
In an updated US Economic Outlook, Jefferies tell clients:
Broadly, these changes are modest relative to what we were looking for at the beginning of the year. We started out 2025 expecting growth to slow in the first half due to exactly the sort of tensions and uncertainty about policy that we are currently seeing. It now appears that the slowdown will be a bit more pronounced than we expected, but we remain optimistic about the second half of the year and beyond.
We expect that the labor market will continue to cool gradually in the months ahead, with downside risks due to government spending uncertainty. We continue to expect that the Fed cut rates again in June, followed by 2 more 25 bp cuts, but we’re now expecting they will be back-to-back in July and September (rather than every-other-meeting).
Trade tensions push down European markets
European stock markets have dropped at the start of the new trading week.
All the major indices are in the red, as investors continue to worry about the impact of global trade wars and a possible US recession.
In London, the FTSE 100 index has shed 36 points, or 0.4%, to 8643 points, with mining companies and banks among the fallers.
Germany’s DAX has dropped by almost 1%, and France’s CAC 40 has lost 0.4%.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, says:
‘’Unease about the effect of Trump’s tariffs hangs over financial markets at the start of the week. The prospect of a recession in the US is lurking, with consumer confidence falling, companies facing increasing trade complexity and investors turning more nervous. China’s deflation problem is also weighing on sentiment, and geopolitical concerns are staying in focus, with attacks on Ukraine intensifying.
The FTSE 100 is on the back foot in early trade, unable to shake off the nervousness surrounding the concerns about slowing global growth.
Airport strike hits German air travel
There’s travel disruption at German airports today, where a 24-hour strike has led to thousands of flight cancellations in a dispute about workers’ pay.
The strike, called by the Verdi union on Friday, impacts 13 airports across the country, including Munich, Berlin and Dusseldorf.
The operator of Frankfurt airport, Germany‘s busiest, said no passenger flights would depart from there on Monday, with delays and cancellations also possible on Tuesday.
Verdi is demanding an 8% wage increase, or at least an increase of 350 euros ($380) more per month, as well as higher bonuses and additional time off.
Employers have rejected the demands as unaffordable, with negotiations due to continue later this month, Reuters reports.
German exports have tumbled, a sign of the troubles gripping Europe’s largest economy.
Exports from Germany fell by 2.5% in January, new data shows, weaker than the 0.5% rise which economists expected.
This pulled Germany’s trade balance down to 16bn for January, down from 20.7bn in December.
In cheerier news for Berlin, though, industrial production rose by 2.0% month-on-month in January.
This may show that Germany’s industrial downturn is bottoming out, suggests Carsten Brzeski, global head of macro at ING, telling clients:
Today’s data confirms the bottoming out of Germany’s industrial slump. However, it is too early to call any substantial turnaround. Manufacturing capacity utilisation is at lows comparable only to those seen during the financial crisis and the initial lockdowns, order books shrank again in January with particularly weak foreign demand, and inventory levels remain at elevated levels. This still paints a rather unflattering picture of a nation known as an industrial powerhouse.
With looming US tariffs on the EU and the expected modern version of ‘beggar-thy-neighbour’ policies by the new US administration, the short-term outlook for German industry remains anything but rosy. This is not just because of the potential impact on German exports, but more so the effect on German investments if companies were to move production to the US.
Shipping firm Clarksons warns of rising uncertainties
Clarksons, the world’s biggest shipping services provider, has warned this morning that trade tensions and geopolitical conflict is hitting its sector.
Andi Case, chief executive officer of Clarksons, told shareholders that both freight rates and asset values have fallen this year, hitting its financial results in 2025.
Case explains:
For some years now we have started each new financial period with an uncertain geo-political outlook; 2025 has started with more uncertainty than most due to political change, ongoing regional conflicts, increased trade tensions, tariffs and sanctions, inflation and changing monetary policy across global economies.
As I write this report, the impact of these uncertainties is that freight rates and asset values have broadly fallen, which has meant that the value of spot business done to date is less than the same period last year.
Shares in Clarksons have tumbled by over 17% in early trading.
The company also reported record underlying pre-tax profits for 2024, and a 4% rise in earnings per share.
China’s stock markets have dropped today, as the double-whammy of trade war fears and deflation weighed on investors.
The CSI 300 index dropped by 0.4%, while in Hong Kong the Hang Seng index slid by 1.8%.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, calls it an “ugly early week selloff in China”, adding:
The week starts on a sharp negative note for the Chinese stocks, as the latest inflation update showed that consumer prices in China fell the most in more than a year….
Overall, the week is expected to bring more tariffs the Chinese tariffs on US agricultural and some Canadian products will start today, while the US steel and aluminium tariffs will be live from Wednesday.
The US-China trade war comes at a time when the Chinese economy is already struggling with weak inflation.
Consumer prices fell in February, pulling the CPI inflation rate down to -0.7% in February, the first negative reading since January 2024.
China’s deflationary pressures are “deepening”, says Stephen Innes, managing partner at SPI Asset Management, adding:
Monday kicks off with the same old deflationary drumbeat as China’s consumer inflation took a deeper dive than expected, slipping below zero for the first time in over a year. The data only reinforces what’s been clear for months—deflationary pressures remain firmly entrenched in the world’s second-largest economy.
The property sector remains stuck in the mud, domestic demand is weak, and despite a bounce in tech stocks, the broader wealth effect just isn’t filtering through to consumers.
China also announced new tariffs against Canada last weekend, creating an early headache for its next prime minister, Mark Carney.
Beijing is bringing in tariffs on over $2.6bn worth of Canadian agricultural and food products, in a retaliation against levies on China-made electric vehicles and steel and aluminium products which Ottawa introduced last October.
The commerce ministry said in a statement.
“Canada’s measures seriously violate World Trade Organization rules, constitute a typical act of protectionism and are discriminatory measures that severely harm China’s legitimate rights and interests.”
China will apply a 100% tariff to just over $1bn of Canadian rapeseed oil, oil cakes and pea imports, and a 25% duty on $1.6bn worth of Canadian aquatic products and pork.
China’s retaliatory tariffs on US farm goods kick in as trade war escalates
Another front in Donald Trump’s trade wars opened up this morning, as China’s retaliatory tariffs on US imports kicked in.
The tariffs, announced last week, target about $21bn of agricultural imports from the US, in response to the extra 10% tariff imposed on China’s exports to the US by Trump.
Beijing’s move covers a wide range of commodities. Imports of US-grown chicken, wheat, corn and cotton will face an extra 15% tariff, the Chinese ministry said last week. Tariffs on sorghum, soybeans, pork, beef, seafood, fruit, vegetables and dairy products will be increased by 10%.
The move will make US products more expensive, and thus less competitive, in the Chinese market, which is likely to lead to more imports from other countries instead.
That is bad news for US farmers, and increases the risks that the US economy slows… or even drops into the dreaded recession.
Introduction: Trump does not rule out recession
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
“If it isn’t hurting, it isn’t working,” was the cry of then-UK-chancellor John Major in 1989, as the British government tightened policy to fight inflation and drove the country into a recession.
But it could also be the catchphrase of the new American president, who appears relaxed about concerns he could trigger a US downturn.
Donald Trump has refused to say whether his trade policies means the US economy is facing a recession or higher inflation, arguing that a “period of transition” is taking place.
Instead, he told Fox News show Sunday Morning Futures:
“I hate to predict things like that. There is a period of transition, because what we’re doing is very big. We’re bringing wealth back to America. That’s a big thing.
And there are always periods of, it takes a little time. It takes a little time, but I think it should be great for us.”
The comments echo Trump’s line about how tariffs will cause ‘a little disturbance’, in his State of the Union speech last week.
Trump was speaking to Fox shortly after the latest US jobs report showed a pick-up in the unemployment rate in February, but also a rise in hiring – with payrolls up 151,000 in February.
That jobs data calmed some nerves about a looming “Trumpcession”, but economists remain concerned that slapping tariffs on major trading partners and slashing the Federal government will hurt growth.
Kyle Rodda, senior financial market analyst at Capital.com, says:
US President Trump implied he’s willing to tolerate weaker growth as the economy “transitions”, something that may sour investor sentiment further – with private sector job creation far outstripping modest public sector job creation.
The data added to the notion the US economy is moderating and its performance is converging with the rest of the world. The rates market, responding to increasingly disappointing data and downside surprises in activity, indicate that the Fed ought to re-starting cutting interest rates in July, if not potentially June.
