World shares fall for a fifth day on trade-war worries

New York — World shares fell for a fifth straight day on Thursday, with emerging-market stocks in their sixth day of declines, as investors braced for an escalation in a trade war between the US and China.

The dollar edged down following a bounce in European currencies, though the greenback still received support from concerns about US President Donald Trump imposing further tariffs on Chinese imports.

Emerging-market stocks lost 0.29% and were near a 13-month low they hit last month, with these shares confirmed to be in a bear market if the index closes more than 20% below its January 26 high.

“You’ve got momentum on the downside for international and its picking up some steam this week [as it did] last week. You have people re-allocating and deciding that the move to go international at the start of the year is now looking terrible,” said Paul Nolte, portfolio manager at Kingsview Asset Management in Chicago. “Relative to the S&P 500, international and emerging market stocks have been performing very poorly.”

A key worry for investors was the end of a public consultation period over trade on Thursday, after which Trump could impose tariffs on an additional $200bn worth of Chinese goods. China’s commerce ministry warned on Thursday that the country would retaliate against any new tariff measures. Trump had said on Wednesday that the US was not yet ready to come to an agreement with China.

Investors also awaited news from US-Canada talks that continued on Thursday about revamping the North American Free Trade Agreement (Nafta). Canada insisted on Wednesday that there was room to salvage the pact despite few signs that a deal is imminent.

The Dow Jones Industrial Average fell 20.5 points, or 0.08%, to 25,954.49; the S&P 500 lost 13.12 points, or 0.45%, to 2,875.48; and the Nasdaq Composite dropped 69.61 points, or 0.87%, to 7,925.57.

The MSCI All-Country World Index, which tracks shares in 47 countries, dropped 0.4%. The pan-European STOXX 600 index fell 0.4%. Investors were worried that problems in Argentina, Turkey and SA were no longer isolated cases, analysts said.

Strategists at Société Générale wrote “there’s definitely more to the emerging-market sell-off than a few unrelated spots of weakness”. Earlier in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.7%.

The dollar, considered a safe haven in times of turmoil has benefited from the trade conflicts. The dollar index, tracking it against a basket of major currencies, fell 0.06%, with the euro down 0.09% to $1.1619.

Sterling added to Wednesday’s gains as some investors positioned for a favourable Brexit outcome though it was well below the previous session’s high as progress was uncertain. It was last up 0.2% against the dollar.

Emerging markets have been hit by the financial crises in Argentina and Turkey. In Indonesia, the central bank intervened in recent weeks to stem the rupiah’s slide. MSCI’s index of emerging-market currencies, which had earlier paused near 16-month lows, was unchanged after two straight days of heavy declines.

US treasury yields were little changed ahead of Friday’s highly anticipated jobs report for August.

Oil future sank after US data showed petrol inventories rose unexpectedly last week, overshadowing a bullish drawdown in crude. US crude fell 2.01% to $67.34 a barrel and Brent was last at $76.00, down 1.64%.

US gold futures gained 0.25% to $1,204.30 an ounce.

Reuters