DAX hits one-month low as Trump tariff fears trigger global sell-off

​​​European markets lead global decline

​The DAX 40 has slumped to its lowest level in a month, while Dow Jones futures have dropped to four-week lows as President Trump's sweeping new tariff announcements sent shockwaves through global markets. The German benchmark is down over 1% in early trading, leading a broad-based sell-off across European indices.

​Dow futures are pointing to a weak Wall Street open, falling 0.8% as investors digest the implications of Trump's aggressive trade stance. The decline marks the worst pre-market performance for US equity futures in nearly a month, suggesting American markets will struggle despite this week's mixed tech earnings.

​European markets are bearing the brunt of the sell-off, with the EUROSTOXX 50 down 0.5% as investors fret about the impact on global trade flows. Germany's export-heavy economy is particularly vulnerable to trade disruptions, explaining why the DAX is leading declines across the region.

​Asian markets reflected this mixed sentiment overnight, with most indices posting modest declines, though South Korea bucked the trend with a sharp 3% drop.

​Trump unveils aggressive tariff regime

​Trump's latest tariff regime has caught markets off guard, imposing punitive rates of up to 41% on imports from key trading partners. Canada faces a hefty 35% levy, while India (25%), Taiwan (20%) and Switzerland (39%) are also in the firing line.

​The breadth of these measures suggests a more aggressive approach to trade policy than many had anticipated, despite Trump's campaign promises. However, the market reaction has been surprisingly muted compared to previous tariff announcements.

​Key factors limiting the damage include existing trade deals with Japan and the EU, while ongoing negotiations with China and Mexico provide some hope for resolution. The average US tariff rate will rise to 15.2% if what's been announced is implemented, compared to 2.3% before Trump took office.

​Markets are now bracing for potential retaliation from affected countries, which could escalate trade tensions further and damage global growth prospects.

​Dollar surges on fading rate cut hopes

​The dollar has been the standout performer, surging 2.5% this week in what's shaping up to be its best week in nearly three years. This strength reflects fading expectations for Federal Reserve rate cuts, with September cut odds now sitting at just 40%.

​The US dollar's rally follows hotter-than-expected inflation data and hawkish commentary from Federal Reserve (Fed) Chair Powell, which has forced investors to recalibrate their expectations for monetary policy. Higher tariffs could add further inflationary pressure, reducing the likelihood of rate cuts.

​Currency markets are showing clear signs of stress, with emerging market currencies particularly vulnerable to the dollar's strength. The combination of trade tensions and a strong dollar creates a challenging environment for global growth.

​Risk-off sentiment is driving flows into the US currency, despite concerns about the domestic impact of higher tariffs on American consumers and businesses.

​Tech earnings fail to provide market support

​Tech earnings have provided little solace for nervous investors this week. Amazon's shares tumbled over 6% in after-hours trading despite beating earnings estimates, as upbeat guidance failed to meet sky-high investor expectations.

​The disappointment comes despite earlier rallies in Meta and Microsoft on strong AI-driven results, highlighting how difficult it's becoming for even the sector's giants to satisfy market demands. Investors appear increasingly selective about which tech names they're willing to back.

​One bright spot emerged from Figma's spectacular initial public offering (IPO) debut, with the design software firm surging 230% on its first day of trading. The rally demonstrates that investor appetite for high-growth tech remains robust, even amid broader macro uncertainty.

​However, the mixed tech results suggest that even strong earnings may not be enough to offset broader macro headwinds in the current environment.

US jobs data in focus

​All eyes now turn to today's US jobs report, with forecasts centred on a 110,000 payroll gain and unemployment edging up to 4.2%. An upside surprise could further dampen rate cut hopes and provide additional fuel for the dollar's rally.

​The jobs data will be crucial for Fed policy expectations, particularly given recent hawkish commentary from policymakers. Strong employment numbers could justify the central bank's cautious approach to rate cuts.

​Markets are also watching for any signs that tariff uncertainty is starting to impact hiring decisions, though such effects typically take time to show up in the data. The combination of trade tensions and mixed earnings suggests markets may struggle to find direction in the near term.

​The jobs data likely will prove pivotal for sentiment heading into next week, with investors seeking clarity on both economic momentum and Fed policy direction.