The pan-European STOXX 600 index fell 1.5%, extending losses to a fourth straight session and recording its biggest daily decline in nearly three weeks.
The volatility index in the region jumped to touch a near three-week high. Most major regional bourses fell more than 1% each, as investors rushed to the safety of gold and the Japanese yen.
Investors are bracing for reciprocal tariffs on US trading partners on April 2.
“As much as investors might hope for it, this is unlikely to put an end to tariff uncertainty,” said Jason Draho, Head of Asset Allocation Americas, UBS Global Wealth Management.
“Uncertainty and market volatility are likely to stay high in the near term as investors recalibrate their outlooks after these events,” Draho said, referring to April 2 and the release of US payrolls data later in the week.
The aggressive tariff scenario prompted Goldman Sachs to lower its US and euro area GDP forecast and add an additional quarter-point rate cut to its forecasts for both the Federal Reserve and the European Central Bank.
Meanwhile, Germany’s consumer price inflation eased to 2.3% in March, preliminary data showed, versus forecasts of 2.4% from economists polled by Reuters.
Euro zone inflation data is due Tuesday. Traders expect rates will ease by about 58 basis points by the end of 2025, as per data compiled by LSEG.
Increasing tariff-driven volatility has weighed on the bloc’s equities in March. The STOXX 600 index lost 2.7% this month, its biggest monthly decline since October.
However, the index ends the year’s first quarter with a 5.2% gain, its best quarter in a year and widely outperforming its US counterpart, helped by Germany’s fiscal boost and prospects of slowing US growth due to the impact of tariffs.
On the day, all major European sectors closed lower or flat. The basic resources sector led declines with a 3.3% loss and touched its lowest level since December 2020.
Airlines dropped after Virgin Atlantic flagged signs of slowing demand in the US. British Airways owner IAG was among the biggest STOXX 600 decliners, falling 6.6%.
Fortnox leapt more than 33%, after the company said its largest owner, First Kraft, and private equity group EQT had made a joint cash offer that valued the Swedish accounting software firm at around 55 billion crowns (US$5.51 billion).