Global stock markets fell for a third straight day yesterday, hurt by worries over the escalation of trade disputes between world powers and a deepening sell-off across emerging market currencies.
With US markets closed for Labour Day, trading activity was generally subdued.
European shares were largely flat, although London’s blue-chip FTSE rallied almost one per cent thanks to a weak British pound.
In Asia, MSCI’s broadest index of shares outside Japan and Tokyo’s blue-chip Nikkei shed about 0.7 per cent each.
MSCI’s All-Country World Index, a gauge of 47 markets, dipped 0.2 per cent and the main emerging equity index fell 0.7 per cent, bearing the brunt of global trade fears.
US President Donald Trump said at the weekend there was no need to keep Canada in the North American Free Trade Agreement and warned Congress not to meddle with the trade talks.
Worries about US tensions with China were also kept alive by a report last week that Mr Trump had told aides he was ready to impose tariffs on an additional $200 billion worth of imports from China as soon as a public comment period on the plan ends on Thursday.
That would be a major escalation given the United States has already applied tariffs on $50 billion of exports from China.
Meanwhile, across the emerging markets, turbulence continued yesterday.
Turkey’s lira led emerging currency losses after data showed inflation spiked to almost 18 per cent in August, while the Indonesian rupiah fell to its lowest levels in 20 years.
Turkey’s lira led emerging currency losses
The Brazilian real weakened more than 1 per cent against the US dollar while the Iranian rial was reported to have hit a record low against the US currency.
The lira, at the centre of emerging market turmoil in recent weeks, fell one per cent to 6.62 per dollar.
Among major currencies, the British pound stood out as the big underperformer, hurt by comments by the European Union’s chief Brexit negotiator, Michel Barnier, that he was “strongly opposed” to British proposals on future trade ties after it leaves the EU.
News that British manufacturers had their weakest month in over two years and export orders suffered a rare fall in August exacerbated sterling’s fall.
Oil prices, meanwhile, rose, supported by concerns that falling Iranian output will tighten markets once US sanctions bite from November, but gains were limited by higher supply from OPEC and the United States.
Brent crude oil was up 63 cents at $78.27 a barrel. US crude was 26 cents higher at $70.05.