Gains on Wall Street and Europe’s main stock exchanges relieved nervy investors yesterday, after the latest escalation in a global trade storm pummeled Wall Street and sent China into bear market territory.
A 0.6 per cent rise by the FTSE in London and 0.2 to 0.4 per cent gains in Frankfurt, Paris and US markets were a welcome sight, after Asia had extended a sell-off that has now wiped $1.5 trillion off world stocks.
China’s yuan had slumped to a near six-month low against the dollar, and 0.5 to 0.8 per cent declines on its big share markets left them down 20 per cent from their January peaks, a threshold that defines a bear market.
As markets steadied, the dollar rose nearly half a percent against a basket of six other top world currencies as US and other benchmark bond yields began to climb again, too.
The tense atmosphere also kept metals on the defensive as amid worries about the global economic fallout of the US administration’s “America First” agenda.
US Treasury Secretary Steven Mnuchin ramped up the rhetoric on Monday, tweeting that restrictions on investing in US tech firms would apply “to all countries that are trying to steal our technology”.
Wall Street was looking to recover from the previous session's trauma. The S&P 500 and Nasdaq both suffered their steepest losses in more than two months, while the Dow Jones closed below its 200-day moving average for the first time since June 2016.
The so-called FAANG stocks, which have led momentum in US stocks, were hammered after reaching record intraday highs last week. Facebook dropped 2.7 per cent, Amazon fell 3.1 per cent, Netflix slid 6.5 per cent, and Alphabet lost 2.6 per cent.
Asia then followed, albeit on a smaller scale. Tech-heavy indexes such as South Korea’s KOSPI fell 0.45 per cent and Taiwan’s weighted index fell 0.55 per cent.
Another sign of the dust gradually settling in Europe was the first rise in European car shares in eight days. Carmakers are another likely target of US President Donald Trump’s tariff plans.
The dollar’s resurgence knocked the euro back to 1.1665 from its near two-week high of $1.1722. Against the yen, the dollar was back up at 109.67, having fallen to a two-week low of 109.365 yen. The yen often attracts safe-haven bids in times of political tension and market turmoil.
Brent crude oil futures were up 0.5 per cent at $75.14 on uncertainty over Libya’s capacity to deliver on exports commitments. Brent futures had fallen 1 per cent overnight as receding investor risk appetite weighed on commodities.
Oil prices were capped after Opec and its allies on Friday agreed to increase global supplies, albeit modestly.