European stock markets started the week on a weaker note, as concerns over the ongoing trade war and new US tariffs dragged down investor sentiment. The STOXX 50 and STOXX 600 indices fell by approximately 1%, hitting their lowest levels in nearly two months. However, despite the short-term losses, both indices are still set to end the first quarter on a strong note, marking one of their best performances since late 2022.

Trade War Concerns Weigh on Markets

Investors remain cautious ahead of new reciprocal tariffs on US imports, which are scheduled to take effect on Wednesday. While the exact details of the tariffs remain uncertain, US President Donald Trump has indicated a more aggressive approach, stating that the tariffs would broadly apply to all countries. This has raised concerns about the potential impact on European exports and manufacturing sectors.

Sector-Wise Performance

The European stock decline was led by sharp losses in the basic resources sector, which dropped to its lowest level since September. The downturn was driven by uncertainty over global trade policies and fears that new tariffs could disrupt supply chains.

Other major losers included banks, chemicals, and construction materials, which all suffered significant declines. These sectors are highly sensitive to economic uncertainty and trade disruptions, making them particularly vulnerable to the latest market concerns.

Q1 Performance Remains Strong

Despite the current decline, European stocks are still on track for an impressive first quarter. The STOXX 50 is down approximately 2.4% in March but has gained around 9% for Q1, marking its best quarterly performance in over a year. Similarly, the STOXX 600 has lost 2.7% this month but remains up 7% for the quarter.

These gains reflect strong corporate earnings, economic resilience in the Eurozone, and easing recession fears, which have supported investor confidence throughout Q1.

Outlook for European Markets

Moving forward, analysts suggest that market volatility may persist, particularly as investors monitor trade policy developments and economic indicators. The European Central Bank’s (ECB) monetary policy stance will also play a key role in shaping market movements.

In conclusion, while short-term losses have been triggered by trade concerns, the broader outlook for European stocks remains positive. Investors will be closely watching upcoming trade negotiations and policy decisions to assess the potential impact on economic growth and corporate earnings.

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