Investing.com - U.S. stock futures slumped further Monday as the Trump administration maintained its stance on tariffs, raising fears of a global recession. The European Union is set to announce its retaliation, after China started the ball rolling last week. The banking sector has already been hit hard, crude has fallen to four-year lows, while Apple faces extreme difficulties given its massive Chinese exposure.
1. U.S. futures slump further
U.S. stock futures slumped further Monday as the Trump administration maintained faith with its tariffs plan on most of its key trading partners despite a two-day historic stock market rout.
At 03:44 ET (07:44 GMT), the S&P 500 futures traded 26 points, or 0.5%, lower Nasdaq 100 futures had fallen by 123 points, or 0.6%, and Dow futures had slipped 123 points, or 0.3%.
U.S. President Donald Trump said on Sunday that his trade tariffs were the only means to “cure” massive financial deficits with the likes of China and the European Union, and that they were here to stay.
Concerns are growing that this trade war will hit global economic activity, including in the world’s largest economy.
Goldman Sachs lifted on Sunday its odds of a 2025 recession to 45% from 35% a week ago, after hiking its recession forecast last week, citing “a sharp tightening in financial conditions, foreign consumer boycotts, and a continued spike in policy uncertainty that is likely to depress capital spending by more than we had previously assumed.”
Monday’s losses in the futures market followed a hefty sell-off to end last week, with the blue chip Dow Jones Industrial Average posting back-to-back losses of more than 1,500 points for the first time ever, the broad-based S&P 500 losing 10% in two days, and the tech-heavy Nasdaq Composite entering a bear market Friday - down 22% from its record high.
2. EU prepares retaliation
China retaliated late last week, with the announcement of 34% additional tariffs on all goods imported from the U.S., and this week could see similar moves from the European Union.
The European Union is considering imposing its first wave of retaliatory tariffs on around $28 billion worth of U.S. goods, as the union’s member states are currently facing 25% import duties on key products like steel, aluminum, and automobiles.
Beginning Wednesday, nearly all other exports to the U.S. will face a 20% reciprocal tariff.
Such a move will have a severe economic impact, with the U.S. tariffs already likely to reduce economic growth in the euro area by as much as 0.5 to 1 percentage points, according to Yannis Stournaras, Governor of the Bank of Greece.
Projections by the European Central Bank suggest that a 25% blanket tariff on European goods entering the U.S. could reduce eurozone growth by 0.3 percentage points within a year.
Stournaras expressed concern, in an interview with the Financial Times published Monday, that EU retaliatory tariffs would likely make the hit worse, cutting growth by up to 0.5 percentage points.
In 2024, the EU imported approximately €334 billion worth of goods from the U.S., while exporting €532 billion to the American market.
3. Apple faces “economic Armageddon”
Apple (NASDAQ:AAPL) has lost $450 billion in market capitalization since President Trump announced his reciprocal tariffs last week, with its stock closing on Friday well below $200 per share.
“The tariff economic Armageddon unleashed by Trump is a complete disaster for Apple given its massive China production exposure,” Wedbush analyst Daniel Ives said in a note on Sunday.
The brokerage estimates that 90% of iPhones are produced and assembled in China. With current tariffs at 54% for China and 32% for Taiwan, the effect on Apple could be "devastating," affecting not only its cost structure but also consumer demand for its products.
The analyst cut the target price to $250 from $325, stressing that “no U.S. tech company is more negatively impacted by these tariffs than Apple.”
The technology giant previously unveiled a $500 billion U.S. investment plan alongside U.S. President Donald Trump in February.
However, shifting even 10% of its supply chain from Asia to the U.S. would likely require around $30 billion and at least three years to execute, with significant disruption expected along the way, according to Wedbush’s estimates.
4. Banking stocks hit hard
European banking stocks have been hit hard Monday, continuing the weakness seen in Asia earlier in the session and on Wall Street last week.
The industry has been spooked by fears that a trade dispute could temper consumer confidence, reduce spending, weaken loan demand and pressure fees from advising on deals.
Shares of Germany’s Commerzbank (ETR:CBKG) and Deutsche Bank (ETR:DBKGn) were both down over 10%, Spain’s Santander (BME:SAN) fell over 6%, while French banks Societe Generale (OTC:SCGLY) and Credit Agricole (OTC:CRARY) were also hit hard.
HSBC’s (LON:HSBA) stock fell over 5% in the U.K., after the Asia-focused banking giant slumped almost 15% in Hong Kong earlier in the day.
On Wall Street, JPMorgan Chase (NYSE:JPM), the biggest U.S. bank by assets, sank 7% on Friday, while Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:MS) dropped more than 7% each.
5. Crude falls to four-year lows
Oil prices continued to slump Monday, hitting four-year lows, as escalating trade tensions driven by the Trump administration’s tariffs stoked fears of a global recession that would hit demand for crude.
Both contracts declined more than 10% last week, and hit their lowest levels since April 2021 earlier in the session, as China - the world’s biggest crude importer - ramped up tariffs on U.S. goods, with the European Union set to follow suit this week.
Crude sentiment has also been hit by last week’s news that several members of OPEC+, the group which includes the Organization of Petroleum Exporting Countries and allies led by Russia, plan to accelerate production increases.
Goldman Sachs last week cut its 2025 Brent price average by 5.5% to $69/barrel, while WTI prices are expected to average at $66/barrel.