The spectre of a global trade war sent world stocks tumbling towards a 2.5 per cent weekly loss yesterday, and left bruised investors reaching for the traditional antidotes – government bonds, gold and the Japanese yen.
The falls came after US President Donald Trump said the United States would impose tariffs of 25 per cent on imported steel and 10 per cent on aluminium, sparking concerns of retaliatory moves from major trade partners China, Europe and neighbouring Canada.
Europe’s STOXX 600 index fell over 1.5 per cent led by a near 5 per cent slump from world’s biggest steelmaker ArcelorMittal SA and 2.5 – 6 per cent drops from the region’s carmakers worried that they might be next.
Wall Street futures were also pointing lower for what would be a fourth straight day and another difficult week for the benchmark S&P 500, Dow Jones Industrial and Nasdaq indexes.
The dollar and US Treasury yields both fell as they appeared to push aside considerations of inflation, a major theme that spooked financial markets over the last month.
Ten-year US Treasuries yields dipped to 2.8024 per cent, hitting its lowest level in three weeks and further extending the distance from its four-year peak of 2.957 per cent touched on February 21.
The dollar fell across the board including to more than one year low against the yen at 105.54.
Europe’s market moves compounded what was already a fragile mood ahead of a crunch few days of politics.
German Bunds – Europe’s credit market benchmark – saw their yields fall to a five-week low of 0.618 per cent as Italy’s BTP yields dropped to a two-week low of 2.008 per cent.
The trade nerves had dominated Asian market moves.
Japan’s Nikkei tumbled 2.5 per cent to end the week down 3.3, while MSCI’s broadest index of Asia-Pacific shares excluding Japan dropped 0.9 per cent to take its losses for the week to 2.1 per cent.
Oil prices were also under pressure, having fallen more than 1 per cent the previous day on trade friction fears.
US crude was little changed in European trade at $60.88 per barrel, having fallen to two-week low of $60.18 on Thursday. It is down 3.7 per cent so far this week.
Brent futures traded at $63.74 per barrel having hit a two-week low of $63.19.