European stocks extended losses Tuesday, with Germany's DAX down 0.9%, France's CAC 40 off 0.8%, and the UK's FTSE 100 falling 0.8%. The sell-off follows U.S. President Donald Trump's threat of escalating tariffs on European allies unless the U.S. acquires Greenland. Markets are bracing for further declines as U.S. markets reopen.

The trade dispute is escalating. European leaders have rejected Trump's Greenland demands and are preparing retaliatory measures. An emergency EU leaders' meeting Thursday will decide on a response, raising the risk of a broader transatlantic trade war. Citigroup downgraded European equities, citing uncertainty clouding the earnings outlook.

Domestic data added to the gloom. UK wage growth slowed to 4.5%, suggesting further Bank of England rate cuts. German producer prices fell 2.5% annually. In corporate news, GSK agreed to acquire RAPT Therapeutics for $2.2 billion, while AstraZeneca plans to delist from Nasdaq for a direct NYSE listing.