European Markets Fall as U.S.–China Trade Tensions Resurface and Investor Confidence Wavers

European stock markets opened lower on Tuesday, reversing the upbeat sentiment seen at the start of the week. The downturn came amid renewed concerns over a potential trade conflict between the United States and China, two of the world’s largest economies. Investors are growing increasingly cautious after U.S. President Donald Trump threatened fresh tariffs in response to China’s new export restrictions on rare earth minerals—a sector where Beijing dominates the global supply chain.

The warning from Washington marks the latest escalation in an already strained relationship between the two economic giants. China currently controls nearly 70% of the global rare earth supply, materials essential for industries such as electric vehicles, defense systems, and semiconductors. Trump’s remarks, made via Truth Social, initially rattled markets before he appeared to soften his stance, suggesting trade relations with China “will all be fine.” Despite this, investors remain wary, with analysts warning that renewed friction could stall recent market gains driven by stimulus hopes in China.

In corporate updates, oil major BP announced it expects to record up to $500 million in post-tax asset impairment charges for the third quarter. The update comes ahead of its earnings report scheduled for early November, signaling potential pressure on energy sector profits. The news weighed on oil stocks across European indices, already struggling with falling crude prices and a weaker global demand outlook.

The British pound slipped 0.4% against both the U.S. dollar and the euro after new labor data showed the U.K. unemployment rate rose to 4.8% in the three months to August, slightly above economists’ expectations. According to Jack Kennedy, a senior economist at Indeed, the country’s labor market “appears stuck in a rut,” with hiring demand muted and workers reluctant to switch jobs. He added that while wage growth is cooling, it remains too strong for the Bank of England to consider cutting interest rates before 2026.

Investors now turn their attention to the IMF and World Bank Annual Meetings in Washington, where global leaders and policymakers will discuss the world economy, development challenges, and potential solutions to rising economic uncertainty. The IMF’s World Economic Outlook report, set to be released later Tuesday, is expected to provide fresh insights into global growth prospects amid mounting geopolitical and trade tensions.

source: CNBC