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US stocks end down sharply after Trump tariff announcement

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Euro, European stocks surge on spending plans for Ukraine

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Bitcoin down after weekend rally on Trump comments

(Updates with closing US markets levels)

By Caroline Valetkevitch

NEW YORK, March 3 (Reuters) - U.S. stocks ended down

sharply Monday, with the S&P 500 posting its biggest daily

percentage drop since December 18 after U.S. President Donald

Trump said 25% tariffs on Canada and Mexico will go into effect

on Tuesday, while the euro strengthened after European leaders

agreed to draw up a Ukraine peace plan.

U.S. indexes hit session lows after the tariff comments. The

Canadian dollar and Mexican peso both hit

one-month lows after the tariff news.

Trump said there was "no room left" for a deal that would

avert the tariffs on Canada and Mexico. He also said reciprocal

tariffs will start April 2.

"It seems that tariffs are definitely going to go

through and it increases the chances of a real economic fallout.

The markets are not psyched to stick around for that," said

Thomas Martin, senior portfolio manager at Globalt Investments

in Atlanta.

"To say 'no room' for negotiation is a hard line, a

definitive statement."

Shares of U.S. automakers declined, with General Motors ( GM )

down 3.6%.

U.S. economic data on Monday also weighed on stocks. It

showed manufacturing was steady in February, but a measure of

prices at the factory gate jumped to a nearly three-year high

and materials deliveries were taking longer, suggesting that

tariffs on imports could soon hamper production.

The Dow Jones Industrial Average fell 649.67

points, or 1.48%, to 43,191.24, the S&P 500 fell 104.78

points, or 1.76%, to 5,849.72 and the Nasdaq Composite

fell 497.09 points, or 2.64%, to 18,350.19.

MSCI's gauge of stocks across the globe

fell 7.14 points, or 0.83%, to 855.81. The pan-European STOXX

600 index ended up 1.07%, with shares of European arms

makers surging.

The euro was up 1.07% at $1.0486, while the dollar

index, which measures the greenback against a basket of

currencies, fell 0.72% to 106.54.

European leaders agreed at the weekend to draft a peace plan

to present to the United States, following Ukrainian President

Volodymyr Zelenskiy's clash with Trump in the Oval Office.

"That's certainly a positive for Europe because it's

unifying more of western Europe including Ukraine and drawing a

line for the Russians, who have been very transparent that they

want to recreate the old Soviet Union," said Tim Ghriskey,

senior portfolio strategist at Ingalls & Snyder in New York.

Reuters reported that parties in talks to form Germany's new

government are considering setting up a defense fund.

Bitcoin was lower after surging over the weekend,

when Trump raised the possibility of a new U.S. strategic

reserve that would include a range of tokens.

Trump posted on Sunday on Truth Social that his January

executive order on digital assets would create a stockpile of

currencies, including bitcoin, ether, XRP, solana

and cardano.

Trump provided no detail on how the fund would work, but it

was enough to revitalize the crypto bulls, who had taken a

serious knock last week.

"Trump just gave the pump that crypto traders have been

holding out for," said Matt Simpson, senior market analyst at

City Index.

Bitcoin was down 8% from Sunday.

Longer-dated U.S. Treasury yields fell after the latest

reading on the manufacturing sector.

The yield on benchmark U.S. 10-year notes

fell 7 basis points to 4.159%, from 4.229% late on Friday.

Also key this week will be the January U.S. payrolls

report, due on Friday.

A recent spate of softer economic data has nudged up

expectations the Federal Reserve may be more active in lowering

interest rates.

Markets are pricing in 67 bps of cuts by the Fed this year,

after earlier views saw the Fed reducing rates by less than 50

basis points.

The European Central Bank is widely expected to cut rates

when it meets on Thursday, although there is less conviction

over what it might signal about the monetary policy outlook,

given geopolitical factors.

Oil prices fell about 2% to a 12-week low on reports OPEC+

will move forward with a planned oil output increase in April

and amid concern that U.S. tariffs could hurt global growth.

Brent futures fell $1.19, or 1.6%, to settle at

$71.62 a barrel, while U.S. West Texas Intermediate (WTI) crude

fell $1.39, or 2.0%, to settle at $68.37.

Spot gold gained 1.1% to $2,890.57 an ounce.