Global markets sink as trade tensions simmer before talks

A worker shelters from the rain as he passes the London Stock Exchange in the City of London at lunchtime October 1, 2008. — Reuters pic
A worker shelters from the rain as he passes the London Stock Exchange in the City of London at lunchtime October 1, 2008. — Reuters pic

LONDON, May 9 — World stock markets sank again today on heightened China-US tensions before make-or-break trade talks in Washington, dealers said.

The dollar and oil prices steadied.

The two-day gathering has taken on huge significance after US President Donald Trump threatened to more than double punitive tariffs on US$200 billion (RM831 billion) of imports tomorrow, arguing that Beijing “broke” their previously agreed commitments on trade.

Chinese trade envoy Liu He returns to the bargaining table in the US capital later Thursday under a tense atmosphere with far-ranging ramifications for the world’s two biggest economies.

Beijing has rejected US accusations of backtracking and warned it would not “capitulate to any pressure” as the pair enter into eagerly-awaited negotiations.

‘Not holding out hope’

“Stocks have endured a major sell-off... as trade tensions between the US and China have ratcheted up,” said CMC Markets analyst David Madden.

“President Trump claims that China ‘broke the deal’, and traders have taken that as a sign that the relationship between Washington DC and Beijing is going to get worse.

“Trade discussions between the two sides will continue today, but investors are not holding out much hope,” Madden added.

In midday deals, London’s benchmark FTSE 100 index of major blue-chip companies was down 0.3 per cent.

Frankfurt’s DAX 30 slid 0.7 per cent, while the Paris CAC 40 shed 1.1 per cent with sentiment hit also by disappointing earnings for ArcelorMittal.

Shares in the world’s largest steel firm tanked 5.36 per cent to 16.82 euros after it revealed that first-quarter net profits plunged on sliding steel prices.

In Asia today, Hong Kong stocks were hammered more than two per cent while Shanghai ended 1.5 per cent lower and Tokyo sank 0.9 per cent.

Entangled

Trump’s remarks have battered global equities and fuelled fears the economic superpowers — who appeared just last week to be nearing a deal — could become entangled in a brutal trade war with worldwide consequences.

For its part, Beijing said an escalation was “not in the interests of the two countries’ people” but warned it would impose “necessary countermeasures” if the tariffs were more than doubled Friday.

Fears of a worsening trade crisis sent many investors scurrying to haven assets like the yen and gold, dealers said.

“Global equities along with US stock futures continue to face pressure with time running out for U.S tariffs to escalate between the world’s two largest economies,” noted Oanda analyst Dean Popplewell.

“Safe haven trading dominates proceedings with yen, gold and sovereign debt climbing as investors continue to seek sanctuary.”

Key figures around 1100 GMT

London — FTSE 100: DOWN 0.3 per cent at 7,249.44 points

Frankfurt — DAX 30: DOWN 0.7 per cent at 12,093.80

Paris — CAC 40: DOWN 1.1 per cent at 5,357.81

EURO STOXX 50: DOWN 1.0 per cent at 3,382.57

Tokyo — Nikkei 225: DOWN 0.9 per cent at 21,402.13 (close)

Hong Kong — Hang Seng: DOWN 2.4 per cent at 28,311.07 (close)

Shanghai — Composite: DOWN 1.5 per cent at 2,850.95 (close)

New York — Dow: FLAT at 25,967.33 (close)

Euro/dollar: DOWN at US$1.1191 from US$1.1192 at 2100 GMT

Pound/dollar: DOWN at US$1.2990 from US$1.3006 

Dollar/yen: DOWN at 109.87 yen from 110.10 yen

Oil — Brent Crude: DOWN two cents at US$70.38 per barrel

Oil — West Texas Intermediate: DOWN four cents at US$62.08 — AFP