S&P 500 falls into correction as tariff fears rattle stock markets

"There is an air of capitulation in financial markets ahead of the April 2nd reciprocal tariff announcement from the US," said Kathleen Brooks, research director at XTB.

The S&P 500 fell into correction territory -- a drop of at least 10 percent from a recent peak. The S&P 500 set a record high just last month as investors still viewed Trump tariff threats as a negotiating tactic.

But as it has become clear Trump intends to go through with imposing massive tariffs on major US trading partners, concerns about their inflationary impact and the possibility they may trigger a recession have mounted.

Adding to fears, Trump said Sunday that tariffs would apply to "all countries", not just those with the largest trade imbalances with the United States.

His administration has still not released a detailed plan about who or what will be impacted, however, leading to uncertainty that led to a spike Monday in the CBOE Volatility Index, colloquially known as Wall Street's "fear gauge".

"Trump continues to be the key reason why markets are having a bad day," said AJ Bell investment director Russ Mould. 

"He has now threatened to target all countries importing goods into the US with tariffs, further clouding economic prospects around the world," he added.

Wall Street's blue-chip Dow stock index bucked the trend, however, managing a small gain in midday trading in New York.

- Trump car tariffs -

Automakers were hit particularly hard in the wake of Trump's announcement that he would also impose 25 percent duties on imports of all vehicles and parts.

In Europe, Porsche and Volkswagen both fell more than three percent. Toyota, the world's biggest carmaker, plunged over three percent, along with Nissan and Mazda. 

"Within the Asia-Pacific region, the car levies will hit Japan and South Korea the hardest," Moody's Analytics economists wrote.

"Such a sizeable tariff hike will undermine confidence, hit production and reduce orders. Given the long and complex supply chains in car manufacturing, the impact will ripple through these countries' economies."

Gold, seen as a safe haven asset in times of uncertainty, hit a record high over $3,100 an ounce.

Yields fell on government bonds, including those of the United States, "reflecting ongoing safe-haven trading due to concerns about US trade policy," said Briefing.com analyst Patrick O'Hare.

In company news, shares in drug maker Moderna share price tumbled more than 10 percent as traders digested news that a top US Food and Drug Administration official had quit over disagreements with Trump's new health secretary, noted vaccine sceptic Robert F. Kennedy Jr.

Among individual companies, US aviation giant United Airlines fell more than four percent amid news that Canadians were pulling back on trips to the United States due to the tariffs.

In Asia, shares in CK Hutchison shed 3.1 percent in Hong Kong as a Chinese review of a multi-billion-dollar deal to offload ports operations, including those in the Panama Canal, appeared likely to lead to a delay of its Wednesday signature.

- Key figures around 1630 GMT -

Tokyo - Nikkei 225: DOWN 4.1 percent at 35,617.56 points (close)

New York - Dow: UP less than 0.1 percent at 41,618.28

New York - S&P 500: DOWN 0.8 percent at 5,544.02

New York - Nasdaq Composite: DOWN 1.6 percent at 17,041.08

London - FTSE 100: DOWN 0.9 percent at 8,582.81 (close)

Paris - CAC 40: DOWN 1.6 percent at 7,790.71 (close)

Frankfurt - DAX: DOWN 1.3 percent at 22,163.49 (close)

Hong Kong - Hang Seng Index: DOWN 1.3 percent at 23,119.58 (close)

Shanghai - Composite: DOWN 0.5 percent at 3,335.75 (close)

Euro/dollar: DOWN at $1.0814 from $1.0838 on Friday

Pound/dollar: DOWN at $1.2921 from $1.2947

Dollar/yen: DOWN at 149.71 yen from 149.72 yen

Euro/pound: UP at 83.69 pence from 83.68 pence

West Texas Intermediate: UP 2.4 percent at $71.04 per barrel

Brent North Sea Crude: UP 2.1 percent at $74.27 per barrel

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