European shares have slumped as China hit back with steep tariffs days after US President Donald Trump announced sweeping levies, intensifying fears of a global recession triggered by the trade war.
The CAC in Paris dropped over 4% to close at 7,274, while the DAX in Frankfurt fell almost 5% to 20,641 and London's FTSE index suffered its worst day since the start of the Covid-19 pandemic as it closed nearly 5% lower at 8,054.
Dublin's ISEQ index was down 5.4% to 9,629.
Europe was hit with a 20% effective US tariff rate this week, prompting traders to increase bets on interest rate cuts from the European Central Bank to shore up economic growth.
All major European sectors were in the red, with European banks leading declines with an 8.4% loss and closing their worst week in three years.
The luxury sector, which heavily relies on China, also faltered as France's LVMH lost 2.4%, while Gucci owner Kering dropped 3.8%.
Meanwhile, Wall Street fell sharply for a second straight session, pushing the Nasdaq toward a bear market.
The Nasdaq Composite fell 4.07%, shedding 20% from its all-time closing high touched in December. If the index closes below that mark, it would confirm a bear market.
The S&P 500 and the Nasdaq were poised to mark their biggest weekly drop since March 2020, and the Dow was on course for its biggest weekly decline since October 2020.
"Recession risk is a significant concern here. Tariffs could wipe out growth and markets are reflecting that. This bull market picture that we had in front of us is now being completely rewritten," said Dana D'Auria, co-chief investment officer at Envestnet.
Investors have shunned riskier assets including stocks and commodities in recent weeks on bets that the tariffs will spark an economic slowdown, prompting them to seek safer assets such as government bonds and gold.
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Federal Reserve Chair Jerome Powell highlighted that Mr Trump's unexpectedly hefty tariffs could trigger higher inflation and slower growth, setting the stage for challenging decisions ahead for the central bank.
Traders continued to anticipate a more accommodative policy from the US central bank, with money market futures pricing in cumulative rate cuts of 100 basis points by the end of this year, compared with about 75 bps a week earlier.
US listings of Chinese companies dived, with JD.com and Alibaba and Baidu shedding over 9% each.
Companies with exposure to China also fell across the board, with mega-caps such as Apple falling 4.7%.
The CBOE Volatility index, known as Wall Street's fear gauge, hit its highest level in eight months at 34.71 points.
Oil prices plunged nearly 8% today, heading for their lowest close since the middle of the pandemic in 2021.
"The real test, of course, will be if reciprocal tariffs emerge and deal a blow to global oil demand (which is what the market is now pricing in) or is this another smoke-and-mirror negotiating tactic from the Trump team," said Dennis Kissler, senior vice president of trading at BOK Financial.
"One thing is for sure, the uncertainty is likely going to remain a price headwind for crude for the next few trading days," Kissler added.
