The GBP/USD currency pair is experiencing significant selling pressure, trading below 1.2450 early Tuesday, amid rising concerns over US President Trump's recent tariff threats. These threats have led to increased risk aversion and a surge in US Dollar buying, affecting global markets. Meanwhile, Nvidia's stock price plunged by 17% on Monday, resulting in an unprecedented loss of $589 billion in its market capitalization. The Nasdaq bore the brunt of the sell-off, dropping over 3%, while the Russel 2000 saw a milder decline of 1%. In contrast, European markets outperformed their US counterparts, with the FTSE 100 managing to post a gain.
Trump's tariff threats have sparked a wave of uncertainty across financial markets. The President expressed his intention to implement 'much bigger' universal tariffs than the 2.5% preferred by Treasury Secretary Scott Bessent. This aggressive stance has buoyed the US Dollar, aided by rebounding bond yields. The resulting dollar surge has placed additional pressure on the GBP/USD pair, pushing it further below key support levels.
Nvidia's dramatic stock market loss highlights the broader impact of these tariff concerns. The company's reliance on chips from Taiwan Semiconductor Manufacturing Company (TSMC) makes it particularly vulnerable to potential tariffs on Taiwanese imports. As a result, Nvidia's stock price collapse contributed significantly to the Nasdaq's sharp decline.
The impact of these developments was not uniform across markets. While US equities faced considerable pressure, European stocks demonstrated resilience. Notably, luxury brands LVMH and BMW emerged as top performers on the Eurostoxx 50 index on Monday. This performance underscores a recent trend where European luxury stocks are beginning to behave like tech stocks, attracting investor interest amid volatility in other sectors.
In China, stock markets remain closed for the Lunar New Year holiday, providing a temporary reprieve from the global market turbulence. However, several Chinese companies have been proactive in adapting to market changes by pivoting to open-source AI models, a move that may influence future market dynamics once trading resumes.
Looking ahead to Tuesday's market open, US and European equity futures indicate a potential continuation of the current downward trend. Investors remain wary of further tariff-related announcements and their potential consequences for global trade and economic stability.