European shares fall, record monthly losses as Trump touts sweeping tariffs

By Medha Singh and Sukriti Gupta

(Reuters) -European shares fell to their lowest close in two months on Monday, as cautious investors fled risky bets after U.S. President Donald Trump said tariffs would hit all countries, fuelling fears of a global economic slowdown.

The pan-European STOXX 600 index fell 1.5%, extending losses to a fourth straight session and recording its biggest daily decline in nearly three weeks.

The volatility index in the region jumped to touch a near three-week high. Most major regional bourses fell more than 1% each, as investors rushed to the safety of gold and the Japanese yen. [MKTS/GLOB]

Investors are bracing for reciprocal tariffs on U.S. trading partners on April 2.

"As much as investors might hope for it, this is unlikely to put an end to tariff uncertainty," said Jason Draho, Head of Asset Allocation Americas, UBS Global Wealth Management.

"Uncertainty and market volatility are likely to stay high in the near term as investors recalibrate their outlooks after these events," Draho said, referring to April 2 and the release of U.S. payrolls data later in the week.

The aggressive tariff scenario prompted Goldman Sachs to lower its U.S. and euro area GDP forecast and add an additional quarter-point rate cut to its forecasts for both the Federal Reserve and the European Central Bank.

Meanwhile, Germany's consumer price inflation eased to 2.3% in March, preliminary data showed, versus forecasts of 2.4% from economists polled by Reuters.

Euro zone inflation data is due Tuesday. Traders expect rates will ease by about 58 basis points by the end of 2025, as per data compiled by LSEG.

Increasing tariff-driven volatility has weighed on the bloc's equities in March. The STOXX 600 index lost 2.7% this month, its biggest monthly decline since October. However, the index ends the year's first quarter with a 5.2% gain, its best quarter in a year and widely outperforming its U.S. counterpart, helped by Germany's fiscal boost and prospects of slowing U.S. growth due to the impact of tariffs.

On the day, all major European sectors closed lower or flat. The basic resources sector led declines with a 3.3% loss and touched its lowest level since December 2020.

Airlines dropped after Virgin Atlantic flagged signs of slowing demand in the United States. British Airways owner IAG was among the biggest STOXX 600 decliners, falling 6.6%.

Fortnox leapt more than 33%, after the company said its largest owner, First Kraft, and private equity group EQT had made a joint cash offer that valued the Swedish accounting software firm at around 55 billion crowns ($5.51 billion).

(Reporting by Medha Singh and Lisa Mattackal in Bengaluru; Editing by Rashmi Aich and Andrew Heavens)