Global stocks dragged down by Trump’s new China tariff threats

New York — A deepening trade dispute between the US and China weighed on global stocks and bond yields on Thursday, prompting investors to shed risky assets in favour of safer ones amid uncertainty over future tariffs.

The trade spat between the world’s top two economies intensified on Wednesday after US President Donald Trump raised pressure on China by proposing a higher 25% tariff on $200bn worth of Chinese imports. China, on Thursday, urged the US to “calm down”, but market participants remained unnerved.

“Markets are substantially weaker as investors are spooked by the latest development in the trade battle,” said Andre Bakhos, MD at New Vines Capital in New Jersey.

On Wall Street, the Dow Jones Industrial Average fell 171.11 points, or 0.68%, to 25,162.71; the S&P 500 lost 7.29 points, or 0.26%, to 2,806.07; and the Nasdaq Composite added 14.66 points, or 0.19%, to 7,721.94.

MSCI’s gauge of stocks across the globe shed 0.75%, while the pan-European FTSEurofirst 300 index lost 1.01%. Germany’s blue-chip index DAX 30, which is seen as a trade-war proxy, fell 1.67%, while the broader pan-European STOXX 600 was down about 0.9%. MSCI’s broadest index of Asia-Pacific shares outside Japan closed 1.6% down, dragged down by a 1.8% fall in Chinese H-shares.

Benchmark US government bond yields edged lower as the market sought safe-haven debt in treasuries amid the trade dispute.

“We’re in risk-off mode after the back and forth between China and the US on tariffs,” said Priya Misra, head of global rates strategy at TD Securities in New York. “You’re already seeing [trade tension] affect investment decisions globally, so it is a growth concern.”

Eurozone government bond yields dipped, and borrowing costs in Germany and France pulled back from seven-week highs.

Analysts blamed the retreat in world stock markets on uncertainty around the Trump administration trade policy, even as recent corporate results and economic data have been seen as encouraging.

“One needs to have a strong gut feeling to invest in this environment and in August, I doubt many people will have one,” said Hervé Goulletquer, deputy head of research at France’s La Banque Postale Asset Management in Paris. He said investors badly needed a “framework of interpretation” to read through the trade statements of the Trump administration and that the poor visibility on that front was holding markets back.

On Wednesday, the US Federal Reserve kept interest rates unchanged as expected, characterising the US economy as strong and on track to increase borrowing costs in September, and likely again in December.

Gold prices held steady on the news after falling 11% since April to its lowest in a year.

Spot gold dropped 0.1% to $1,214.39/oz. US gold futures fell 0.39% to $1,222.80/oz.

Oil prices climbed on Thursday, reversing course after a report suggested crude stockpiles at the US storage hub at Cushing, Oklahoma, fell in the latest week. US crude rose 0.99% to $68.33 a barrel and Brent was last at $72.72, up 0.46% on the day.

Reuters

Source: businesslive.co.za