Trade row flare-up knocks stock markets

London — Equity markets on both sides of the Atlantic slid on Monday as investors fretted over the latest flare-up in the China-US trade war.

Eurozone heavyweights Frankfurt and Paris were each down more than 1.5%, while London held up better thanks to a weak pound, as investors tracked ongoing Brexit turmoil.

On Wall Street the Dow Jones index fell over 100 points at the opening bell.

“US stocks are lower in early action, with the technology sector being pressured by the potential fallout of the escalated trade tensions between the US and China,” the Charles Schwab brokerage said in a note.

In the midst of a trade war with Beijing, President Donald Trump has barred US companies from engaging in telecommunications trade with foreign companies said to threaten American national security.

US internet giant Google, whose Android mobile operating system powers most of the world’s smartphones, then announced that it was beginning to cut ties with China’s Huawei, which Washington considers a national security threat.

“Equity markets are in the red … as dealers are still worried about the trade standoff between the US and China,” said analyst David Madden at trading firm CMC Markets UK.

“The fact that Washington has effectively blocked Huawei from the US market is likely to drag out the trade dispute, and the prospect of a quick solution seems slim.”

The move could have dramatic implications for Huawei smartphone users, as the Chinese telecoms giant will no longer have access to Google’s proprietary services — including gmail and Google Maps apps — a source close to the matter said.

Reports also emerged on Monday that several US chip makers providing vital hardware for Huawei’s smartphones have stopped supplying the Chinese firm.

SEB emerging markets strategist Per Hammarlund said that the latest development made it unlikely that Beijing and Washington would end their dispute in the runup to the G-20 summit in Japan in June.

“Chances of a breakthrough before the G-20 summit are very small, with both sides likely reassessing their strategies following the failure to reach an agreement in Washington — and the move by the US to blacklist Huawei,” Hammarlund said.

However, most Asian markets rose on Monday after Trump showed signs of conciliation elsewhere.

Global markets have been in turmoil for two weeks since Trump threatened — and later delivered — a hike in tariffs on Chinese imports, to which Beijing retaliated and relit their debilitating trade battle.

The move also threw a spanner in the works for long-running negotiations between the economic superpowers that were thought to have been close to conclusion.

But there was a sliver of hope after Trump on Friday removed steel tariffs on Canada and Mexico and announced a six-month delay in imposing steep tariffs on auto imports as he seeks talks with Japan and the EU on the issue.

Meanwhile, Mumbai equities and the rupee soared on the back of exit polls suggesting business-friendly Prime Minister Narendra Modi was on course to be re-elected.

Sydney stocks and the Australian dollar rallied after a shock win for the conservatives, while Japanese dealers were cheered by forecast-beating GDP data.

However, the pound is wallowing near four-month lows on fears Britain will leave the EU in October without a divorce deal.

AFP