European markets opened lower on Tuesday as investors closely monitored U.S. trade policies and political developments, raising concerns over global economic stability. Traders were reacting to President Donald Trump’s announcement of new tariffs, including a 10% duty on imported timber and lumber, and an initial 25% tariff on kitchen cabinets, bathroom vanities, and upholstered furniture. According to Trump, these imports threaten the U.S. economy and national security, with the rates set to increase further next year.
Adding to market uncertainty is the looming risk of a U.S. federal government shutdown. Top Democrats and Republicans met with Trump at the White House on Monday, but no breakthrough was reported. Vice President JD Vance warned, “I think we’re headed to a shutdown because the Democrats won’t do the right thing.” While government shutdowns typically have limited market impact, analysts suggest that current conditions—slowing labor markets, elevated stock valuations, and stagflation fears—could make this shutdown more significant.
Rating agencies are also under the spotlight as the shutdown could force a review of the U.S. credit rating, which Moody’s downgraded in May. Investors are weighing these risks against market fundamentals, trying to assess whether the political stalemate could trigger volatility in global bond and equity markets. U.S. stock futures were largely unchanged overnight as traders sought to sustain momentum from Monday’s strong performance in September.
Meanwhile, attention in Europe shifted to the U.K., where the Labour Party continues its annual conference in Liverpool. Finance Minister Rachel Reeves’ speech on Monday offered few clues about potential tax measures in the Autumn Budget, while Prime Minister Keir Starmer is expected to address delegates later Tuesday. Analysts say the conference could influence investor sentiment on U.K. fiscal policy and broader European markets.
In Asia-Pacific markets, trading was mixed as official Chinese data showed manufacturing activity contracted for the sixth consecutive month. The ongoing slowdown in China adds another layer of concern for global investors already navigating U.S. tariffs and political uncertainty. Together, these developments are shaping a cautious mood across major financial markets worldwide.
Source: Cnbc