Equity indexes on Wall Street and around the world fell yesterday as trade concerns weighed on investors, taking the pep out of a recovery in many markets earlier in the day.
Washington announced plans yesterday to slap tariffs on European Union steel and aluminum imports while the US commerce secretary said any escalation of a trade dispute would depend on the bloc’s reaction.
That helped deflate or, in some cases, erase earlier gains in global stock markets and a euro that was seeming to move past concerns about the Italian government.
The Dow Jones Industrial Average fell 220.08 points, or 0.89 per cent, to 24,447.7, the S&P 500 lost 10.96 points, or 0.40 per cent, to 2,713.05 and the Nasdaq Composite dropped 0.45 points, or 0.01 per cent, to 7,462.00.
The pan-European FTSEurofirst 300 index lost 0.49 per cent. Germany’s DAX sank 1.27 per cent on reports that President Donald Trump aimed to push German carmakers out of the United States.
MSCI’s gauge of stocks across the globe shed 0.16 per cent after a stronger showing earlier.
“Flows should benefit Treasuries versus equities... especially with all the tariff issue headlines hitting the tape,” Andrew Brenner, partner at National Alliance Capital Markets, said in a note.
China lashed out at the renewed threats from the White House on trade and warned it was ready to fight back, days ahead of a planned visit by US Commerce Secretary Wilbur Ross.
Markets have been wrestling this week with the implications of an Italian governing crisis, which sent its government bonds spiralling down earlier this week and hit the euro and other risk assets. But Italian leaders made new efforts to form a government.
Italy’s two-year government bond yield was back down to 1.3 per cent after hitting near-five-year highs of 2.7 per cent on Tuesday.
The euro climbed 0.15 per cent to $1.1678 after its biggest jump since early January on Wednesday.
After a high-volume move into safe-haven 10-year Treasury notes earlier this week, those bonds last rose an additional 3/32 in price to yield 2.8332 per cent, from 2.844 per cent late on Wednesday.
This was despite data showing US consumer spending rose more than expected in April while inflation continued to rise steadily.
The dollar index fell 0.19 per cent, and emerging market stocks saw gains, rising 0.79 per cent.
The euro’s rise came as two polls in Italy showed 60 to 72 per cent of respondents wanted the country to remain part of the euro. Markets have been concerned about the prospect that populist parties there could push to leave the currency.
In commodity markets, Brent crude prices reversed earlier losses to hit their biggest premium to US futures in over three years yesterday, as the prospect of more inventory increases weighed heavily on West Texas Intermediate prices.
US crude stockpiles rose by one million barrels in the week to May 25, according to the American Petroleum Institute (API), while analysts had expected a drop. US crude fell 1.52 per cent to $67.17 per barrel and Brent was last at $78.21, up 0.63 per cent.