​Markets react to Trump tariff threats and Fed pressure

European indices face headwinds

European markets have borne the brunt of the tariff concerns, with Euro Stoxx 50 futures declining 0.6% and Germany (DAX) 40 futures falling 0.7%. These moves reflect genuine concerns about the potential impact on European exporters, particularly Germany’s manufacturing sector, which remains heavily dependent on trade with the US.

The decline in European index futures suggests investors are pricing in significant disruption to transatlantic trade flows. The automotive and technology sectors, which have substantial exposure to US markets, are likely to face particular pressure if these tariff threats materialise into concrete policy.

EU officials are reportedly considering various responses to potential US trade actions, though the specifics remain unclear. The challenge for European policymakers lies in calibrating a response that protects domestic interests without escalating tensions further.

The weakness in European markets contrasts sharply with the relatively muted reaction in Asian trading, suggesting investors view this primarily as a bilateral US-EU issue rather than a broader global trade conflict.

Bitcoin surges past $120,000 milestone

In stark contrast to traditional market weakness, Bitcoin has powered through the $120,000 barrier for the first time, extending its remarkable rally to new record highs. The cryptocurrency’s surge comes despite broader market uncertainty, highlighting its growing appeal as both a hedge against currency debasement and geopolitical tensions.

The latest leg higher appears driven by expectations that the incoming Trump administration will adopt crypto-friendly policies, including potential regulatory clarity and possible strategic Bitcoin reserves. This regulatory optimism has helped sustain momentum even as traditional risk assets struggle with trade policy uncertainty.

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