European shares attempt recovery as Trump opens a new trade war front.

On Tuesday, European shares opened on a higher note, attempting to recover from the three days of falls. However, the mood remained gloomy after President Trump showed he was ready to open another trade dispute despite signs of economic damage.

The U.S. has threatened duties of up to 100% on French goods and tariffs on Brazil and Argentina metals. He accused Brazil and Argentina of their massive currency devaluation.

France said it would retaliate strongly on duties on its goods such as champagne, handbags, and other products. The U.S. imposed tariffs following France’s new digital services tax, which the U.S. says it harms U.S. tech companies.

The pan-European equity index, which slumped 1.6% on Monday for its biggest one-day loss in two months, edged up 0.3%. But French shares remained flat.

Shares in some luxury goods companies extended losses; however, LVMH shed almost 2% to a one-month low. Other firms, such as L’Oreal, managed to rise modestly.

“Today you have a bounce, but it’s fairly mechanical, the fall was really steep yesterday. And now the biggest risk is that the market wakes up to the reality that macro is really bad,” said Stéphane Barbier de la Serre. He is the macro strategist at Makor Capital Markets.

New trade was front opens

U.S. stocks futures point to a firmer Wall Street, but it follows a gloomy session in Asia. The MSCI index of Asia-Pacific shares ex-Japan dropped 0.4%. Japan’s Nikkei shed 0.6%, and Australian shares posted their worst day in two months with a drop of 2.2%.

China’s repose to the U.S. move to support Hong Kong protesters has chilled sentiments. China said U.S. military ships and aircraft may not visit Hong Kong and announced sanctions on some U.S. NGOs.

MSCI’s world stocks index remained flat at a one-week low.

China’s blue-chip share index started the recovery, closing in the black, as did the Shanghai benchmark- which had plumbed a three-month low earlier.

Markets had drawn some cheer from upbeat Chinese factory surveys as well as higher-than-expected manufacturing and inflation readings from the eurozone.

But the U.S. Institute for Supply Management (ISM) cast a pall on hopes for an economic upturn. ISM data showed manufacturing had contracted for a fourth straight month as new orders slid. 

The news pushed U.S. shares off recent record highs, with all three indexes losing 0.6% to 0.9%.

“If you look at U.S. manufacturing, all the components were falling. If you look at the new orders, the components were at 10-year lows … but no one seems to look at these,” said Barbier de la Serre.

“The market has been listening to the narrative of an impending cyclical upturn, there has been a certain amount of herding, trend following,” he said, referring to the recent bounce in equity markets.

Hopes are pinned on the U.S. consumer to keep the economy afloat.