Stock markets around the world retreated yesterday amid concerns over the potential wider impact of a trade spat between China and the United States, while oil prices rallied to a four-year high after OPEC ignored US calls to raise supply.
Wall Street equities tumbled after the Axios news site reported that US Deputy Attorney General Rod Rosenstein had verbally resigned to White House Chief of Staff John Kelly, in anticipation of being fired by President Donald Trump. Other media sites had similar reports.
The Dow Jones Industrial Average fell 142.46 points, or 0.53 per cent, to 26,601.04, the S&P 500 lost 9.7 points, or 0.33 per cent, to 2,919.97 and the Nasdaq Composite dropped 8.01 points, or 0.1 per cent, to 7,978.95.
MSCI’s gauge of stocks across the globe shed 0.46 per cent.
US Treasury yields across maturities briefly fell by around two basis points after the report about Rosenstein, who oversees the federal investigation into Russia’s role in the 2016 US election and had reportedly suggested secretly recording Trump.
Yields ticked back up, however. The benchmark 10-year notes last fell 3/32 in price to yield 3.0796 per cent, from 3.068 per cent late on Friday.
The benchmark index for eurozone blue chip stocks retreated 0.62 per cent, while the pan-European, which also includes stocks in Britain and outside the European Union, was down 0.6 per cent.
Europe had followed Asia lower, with MSCI’s broadest index of Asia-Pacific shares outside Japan closing 1.1 per cent lower, while Japan’s Nikkei rose 0.82 per cent.
China and the United States, the world’s two biggest economies, imposed fresh tariffs on each other’s goods yesterday, showing no signs of backing down from an increasingly bitter trade dispute that is expected to knock back global economic growth.
A worsening trade environment is also likely to exacerbate diverging economic performance and policy rates between different regions, Citi analysts said in a note yesterday.
European Central Bank chief Mario Draghi said he expected a vigorous pickup in euro zone inflation, backing moves towards unwinding an ECB asset purchase programme meant to stimulate the economy. That drove the euro to more than a three-month high against the dollar.
The dollar index, tracking it against a basket of other major currencies, fell 0.18 per cent.
Oil prices jumped more than two per cent to a four-year high after Saudi Arabia and Russia ruled out any immediate increase in production despite calls by Trump for action to raise global supply.
US crude rose 1.95 per cent to $72.16 per barrel and Brent was last at $80.77, up 2.5 per cent on the day.