The threat of a trade war sent many world stock markets broadly lower in choppy trading yesterday and boosted safer assets like the yen and government bonds, a day after US President Donald Trump announced tariffs on up to $60 billion of Chinese goods.
Mr Trump signed a presidential memorandum on Thursday that could impose tariffs on up to $60 billion of imports from China, although the measures have a 30-day consultation period before they take effect.
After another bruising week, a key gauge of world equity markets was broadly headed for their first quarterly loss since early 2016 as a spike in volatility, rising inflation and the spectre of a trade war spooked investors who had enjoyed a multi-year bull run.
MSCI’s gauge of stocks across the globe shed 0.53 per cent. The index has lost around 3.4 per cent since Monday and was set for its worst week since early February when a spike in volatility had sent markets into a tailspin.
“The equity markets are getting clobbered, which is not that surprising with fears of a trade war breaking out,” said Paul Fage, a TD Securities emerging markets strategist.
On Wall Street, the benchmark S&P 500 stock index and the Dow were buoyed by gains in Nike, but the tech-heavy Nasdaq was weighed by losses in chip stocks led by Micron Technology.
The Dow Jones Industrial Average rose 67.35 points, or 0.28 per cent, to 24,025.24, the S&P 500 gained 2.12 points, or 0.08 per cent, to 2,645.81 and the Nasdaq Composite dropped 11.13 points, or 0.16 per cent, to 7,155.55.
European stocks fell, with Germany’s Dax down 1.4 per cent, the French CAC 40 1.3 per cent lower and Britain’s FTSE 100 0.4 per cent in the red. That followed large declines in Asia, where the Nikkei tumbled 4.5 per cent and the Hang Seng index lost 2.4 per cent.
In Europe, benchmark issuer Germany’s 10-year bond yields hovered close to 10-week lows struck a day earlier at around 0.52 per cent. While German bond yields recovered in European trading, they were still on track for their biggest two-week drop since November.
Many investors also turned to the Japanese yen, a currency likely to benefit from a full-fledged trade war.
The currency gained as much as 0.6 per cent against the dollar to 104.635 yen, the first time it has been below 105 since November 2016. Investors later booked profits to leave the yen up 0.1 per cent at 105.19 yen per dollar.
US crude rose 1.62 per cent to $65.34 per barrel and Brent was last at $69.44, up 1.55 per cent on the day.