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US Markets Recap: Trump Tariffs Impact Risk Sentiment
On Monday, March 3, US equity markets stumbled as investors responded to tariff developments. The Nasdaq Composite Index tumbled 2.64%, while the Dow and the S&P 500 fell 1.48% and 1.76%, respectively.
US manufacturing sector data contributed to the losses. The ISM Manufacturing PMI dropped from 50.9 in January to 50.3 in February. The February survey revealed a fall in new orders and job cuts amid tariff uncertainties. February’s pullback raised concerns about the US economy, pressuring risk assets.
US Tariff Developments and Defense Spending in Focus
Later in the European session, traders should monitor potential US tariff escalations. President Trump has threatened 25% tariffs on EU goods, raising fears of a US-EU trade war.
Alicia Garcia Herrero, Natixis Asia Pacific Chief Economist, recently commented:
“Trump is imposing 25% tariffs on European cars and other items. This comes after siding with China at the UN and against Ukraine and European allies. Trump has killed the Transatlantic Alliance in only 5 weeks after taking office. Imagine what he can do in 2-4 years (if not more).”
Aslak Berg, a Research Fellow at CER, an award-winning think-tank, added:
“The real big dispute comes in April, when I would expect the administration to announce plans to tariff the EU and other partners in the same order of magnitude that were announced today. The EU will have to step up to dissuade the US, but the entities best placed to change the administration’s mind are US multinationals as well as financial markets. Time to step up!”
Amid tariff uncertainties, rising expectations of increased EU military spending could help cushion market fallout. President Trump’s stance on Russia has accelerated EU defense initiatives. In Germany, progress toward a defense fund could influence DAX trends. Military, industrial, and aerospace stocks could benefit from a defense fund.
Near-Term Outlook
The DAX’s near-term trajectory will depend on tariff developments and defense spending-related news:
- Escalating US-EU tensions could drag the DAX toward 22,500.
- Easing tensions and progress on a German defense fund may drive the DAX toward 23,500.
As of Tuesday morning, US futures pointed to a mixed session, with the Nasdaq 100 mini up 39 points.
DAX Technical Indicators
Daily Chart
After Monday’s rally, the DAX remains well above the 50-day and 200-day Exponential Moving Averages (EMAs). However, the recent trends signal increased volatility despite the broader bullish trend.
If the DAX returns to Monday’s record high of 23,308, it could signal a move through 23,500 next. A break above 23,500 may enable the bulls to target 23,750.
Conversely, a DAX drop below 22,750 could bring 22,500 into play. A fall through 22,500 would enable the bears to target 22,350.
With the 14-day Relative Strength Index (RSI) at 63.61, the DAX could climb to Monday’s high of 23,308 before entering overbought territory (RSI higher than 70).
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