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European Markets Rebound as Asia Recovers from Sell-Off
European markets opened higher on Tuesday with Germany’s DAX, France’s CAC 40, and London’s FTSE 100 all showing gains after a significant sell-off on Monday.
Japan’s benchmark Nikkei 225 index soared nearly 11% on Tuesday, recovering from a sharp drop that had contributed to a global market slump on Monday. Other Asian markets also saw a rebound, though to a lesser extent, indicating a stabilization after the week’s turbulent start.
Monday’s market plunge was reminiscent of the 1987 crash, sparking fears of a slowing US economy. The Nikkei gained nearly 11% early Tuesday and was trading 10.3% higher by early afternoon as investors sought bargains after the previous day’s 12.4% drop. On Monday, the S&P 500 dropped 3%, marking its worst day in nearly two years, closing at 5,186.33. The Dow Jones Industrial Average fell by 1,033 points, or 2.6%, to 38,703.27, while the Nasdaq composite slid 3.4% to 16,200.08 as major tech companies like Apple and Nvidia experienced significant losses.
The global sell-off that began last week was further fueled by a report showing a slowdown in US hiring, raising concerns that the Federal Reserve’s prolonged high interest rates might be stifling the economy too severely. A report from the Institute for Supply Management on Monday showed slight growth in US services businesses, particularly in arts, entertainment, recreation, accommodations, and food services.
Professional investors cautioned that technical factors might have amplified the steep losses. South Korea’s Kospi index dropped 8.8% on Monday, and Bitcoin fell below $54,000 from over $61,000 on Friday. Even gold, typically a safe haven during market turmoil, slipped about 1%.
On Tuesday, nearly all Asian markets, except Singapore, saw gains. The Kospi jumped 4.3% to 2,546.64. Hong Kong’s Hang Seng index rose 0.5% to 16,775.65. Australia’s S&P/ASX 200 edged 0.3% higher to 7,677.50. Taiwan’s Taiex gained 1.2% after an 8.4% drop the day before. The Shanghai Composite index, which had largely bypassed Monday’s turmoil, was up slightly to 2,861.87.
The dramatic market moves reflect fears that the US economy might be harmed by the Federal Reserve’s high interest rates, leading to speculation about a possible emergency rate cut. The yield on the two-year Treasury, closely tied to Fed expectations, briefly sank below 3.70% on Monday before recovering to 3.89%.
“The Fed could ride in on a white horse to save the day with a big rate cut, but the case for an inter-meeting cut seems flimsy,” said Brian Jacobsen, chief economist at Annex Wealth Management, noting that such actions are usually reserved for emergencies.
Despite the recent declines, the US economy is still growing, and a recession is not certain. The stock market remains up significantly for the year, with double-digit gains for the S&P 500, Dow, and Nasdaq Composite.
Other factors contributing to Monday’s market plunge include the Bank of Japan’s recent interest rate hike, which led to a stronger yen and impacted global trading strategies. Big Tech companies, particularly those involved in artificial intelligence like Nvidia, saw sharp declines amid fears that their stock prices had risen too quickly.
In commodities, early Tuesday saw US benchmark crude oil up $1.18 to $74.12 per barrel, and Brent crude rising $1.00 to $77.30 per barrel. The euro edged up to $1.0956 from $1.0954.
As markets continue to react to economic data and global events, the path forward remains uncertain, but Tuesday’s gains suggest a temporary stabilization after a volatile start to the week.
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Trump Weighs Troop Cuts in Spain and Italy Amid Growing Rift Over Iran War
President Donald Trump said on Friday that he is considering reducing the US military presence in Spain and Italy, widening a dispute with key NATO allies over their opposition to the ongoing war with Iran.
Speaking to reporters in the Oval Office, Trump suggested both countries had failed to adequately support Washington’s military campaign in the Middle East.
“Yeah, probably, I probably will. Why shouldn’t I?” Trump said when asked whether he would withdraw troops from the two countries. He added that Italy “has not been of any help” and described Spain as “absolutely horrible.”
The comments came just one day after Trump floated a similar proposal regarding Germany, following criticism from German Chancellor Friedrich Merz over the administration’s handling of the Iran conflict.
Trump has repeatedly argued that the US-led campaign against Iran serves the security interests of the entire Western alliance. He has expressed frustration that several NATO members have not provided stronger military or political backing, particularly in efforts to counter Iran and reopen the Strait of Hormuz.
According to the latest Pentagon figures, the United States has about 36,000 troops stationed in Germany, roughly 12,600 in Italy and nearly 3,800 in Spain. While Trump did not specify the scale of any potential reductions, reports in US media suggest the cuts under consideration could be substantial.
Tensions with Italy have grown in recent weeks after Prime Minister Giorgia Meloni publicly questioned the war. Trump, once a close ally of the Italian leader, accused her of lacking the courage to fully support the campaign.
Relations with Spain have been strained for longer. Disagreements initially emerged over Madrid’s stance on the war in Gaza and later expanded to include defence spending and NATO commitments. Spain has resisted Trump’s push for alliance members to raise defence spending to 5 per cent of gross domestic product.
Prime Minister Pedro Sánchez has said Spain will only increase military spending when it aligns with national interests. That position has drawn repeated criticism from Washington.
The Trump administration has previously threatened trade measures against Spain and has even raised the possibility of suspending the country from NATO. Reports last week indicated that such discussions have resurfaced amid Spain’s refusal to support the Iran campaign.
The diplomatic tensions come as the war enters its third month, with no clear end in sight. The conflict has disrupted global energy markets, especially after the closure of the Strait of Hormuz. Brent crude settled at around $114 a barrel on Friday, sharply higher than the roughly $70 level seen before the conflict began.
Trump’s latest remarks are likely to deepen divisions within NATO at a time when alliance unity is already under strain.
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Trump Threatens Troop Reduction in Germany Amid Dispute With Chancellor Merz
US President Donald Trump has suggested that the United States could reduce its military presence in Germany, escalating tensions with German Chancellor Friedrich Merz over the handling of the conflict involving Iran.
In a social media post on Wednesday, Trump said Washington was reviewing the possibility of withdrawing some American troops from Germany, with a decision expected soon. The announcement comes amid a growing public disagreement between the two leaders over US strategy in the Middle East.
“The United States is studying and reviewing the possible reduction of troops in Germany,” Trump wrote, signalling that the longstanding American military footprint in Europe’s largest economy could once again be under scrutiny.
Germany hosts some of the most important US military facilities outside the United States, including Ramstein Air Base, the headquarters of US European Command and US Africa Command, and Landstuhl Regional Medical Center, the largest American military hospital abroad.
Trump’s latest warning follows comments by Merz earlier this week, in which the German leader said Washington was being “humiliated” by Iran and questioned the effectiveness of the US approach to the conflict. Merz has repeatedly called for a clearer strategy and a diplomatic resolution to the crisis.
Despite the sharp exchange, Merz said on Wednesday that his personal relationship with Trump remained strong. He added, however, that he had harboured concerns from the outset about the military campaign against Iran.
The two leaders met at the White House in March, shortly after the United States and Israel launched strikes on Iranian targets. At the time, Merz said Germany was prepared to work closely with Washington on future regional strategy, while also warning that a prolonged conflict could inflict serious damage on the global economy.
That concern has intensified as the closure of the Strait of Hormuz continues to disrupt global energy markets. The vital waterway, through which about one-fifth of the world’s oil supply normally passes, has remained effectively shut since fighting began in late February.
“We are suffering considerably in Germany and in Europe from the consequences of the closure of the Strait of Hormuz,” Merz said, urging all sides to seek a resolution.
Trump, however, has shown increasing frustration with Germany’s stance. In a post on Tuesday, he criticised Merz’s remarks on Iran and accused the chancellor of misunderstanding the threat posed by Tehran’s nuclear ambitions.
This is not the first time Trump has threatened to reduce US troop levels in Germany. During his first term, he announced plans to withdraw nearly 10,000 troops, citing Berlin’s defence spending. That proposal was later halted by the Biden administration.
Any renewed reduction would likely raise fresh questions about US commitment to NATO and European security at a time of heightened global instability.
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