LONDON, May 8 — Punch-drunk stock markets suffered through a third straight session of trade war fears today, trembling at the prospect of President Donald Trump unleashing a trade war on China.
His threat to hike tariffs on US$200 billion of Chinese imports at the end of the week had already wiped more than US$1 trillion off stock market valuations on Monday and Tuesday.
Nervous investors preferred to shift their money from equities into government bonds, gold or the Japanese yen, all attractive safe-haven assets in times of uncertainty.
“We’re in risk aversion mode in the markets as investors prepare for the prospect of tariffs on Friday rather than a trade deal between the world’s two largest economies,” said Craig Erlam, an analyst with OANDA.
Some analysts said they couldn’t rule out that Trump would step back from the brink before the new tariffs become a reality, but investors mostly played it safe.
Gambit?
“The fact this could be little more than a bargaining gambit cannot be ignored,” said James Hughes, chief market analyst at AxiTrader. “Developments in the coming days could see volatility maintained.”
Having traded mostly lower for the first part of the day, some European markets managed to stabilise by the mid-afternoon, but there was little doubt that investors didn’t have the stomach to go hunting for bargains.
Frankfurt’s saving grace was a sharp gain in DAX index heavyweight Siemens which reported steady profits and announced the spinoff of its historic power and gas unit.
Wall Street fell again shortly after the start of business in New York.
Beijing insisted it would still send its top negotiator to planned talks in the US tomorrow and Friday, but observers said confidence has been shattered, with uncertainty reigning ahead of the high-stakes meeting.
Trade war, trade peace
“The two largest economic powerhouses, the US and China, either will be at a trade war or a trade peace and in reality there’s only a couple of people who know the answer to that and it isn’t those of us on Wall Street,” Larry Robbins, CEO of Glenview Capital Management, told Bloomberg TV.
Earlier today Asian markets slumped again, following yesterday’s blowout on Wall Street.
Oil prices were volatile, with observers predicting a rough near-term for crude futures with supply gaps from Venezuela and Iran having been filled.
Additionally there is concern that Opec and Russia may not extend their production caps past next month, despite US output and stockpiles rising.
Key figures around 1340 GMT
London – FTSE 100: DOWN 0.3 per cent at 7,236.09 points
Frankfurt – DAX 30: UP 0.3 per cent at 12,124.88
Paris – CAC 40: FLAT at 5,394.08
EURO STOXX 50: FLAT at 3,401.07
New York – Dow: DOWN 0.3 per cent at 25,894.89
Tokyo – Nikkei 225: DOWN 1.5 per cent at 21,602.59 (close)
Hong Kong – Hang Seng: DOWN 1.2 per cent at 29,003.20 (close)
Shanghai – Composite: DOWN 1.1 per cent at 2,893.76 (close)
New York – Dow: FLAT at 25,963.00
Euro/dollar: UP at US$1.1202 from US$1.1192 at 2100 GMT
Pound/dollar: DOWN at US$1.3009 from US$1.3072
Dollar/yen: DOWN at 110.11 yen from 110.26 yen
Oil – Brent Crude: DOWN 30 cents at US$69.58 per barrel
Oil – West Texas Intermediate: UP 1 cent at US$61.41 per barrel
— AFP
