Stock markets slump as trade war tensions spike

Traders work on the floor of the New York Stock Exchange (NYSE) shortly after the opening bell in New York, US May 31, 2019. — Reuters pic
Traders work on the floor of the New York Stock Exchange (NYSE) shortly after the opening bell in New York, US May 31, 2019. — Reuters pic

NEW YORK, June 1 — Global stocks tumbled today, with investors fleeing equities for safe-haven assets following the latest salvos on international trade.

With US President Donald Trump announcing new tariffs on all Mexican imports and China warning it would create a list of “unreliable” foreign companies, investors piled into low-risk assets, sending the yield on 10-year German government bonds to a record low.

German Bunds hit minus 0.213 per cent in the secondary market, breaking the previous record of minus 0.205 percent set in July 2016, while the 10-year US Treasury note fell further, stoking additional investor angst.

The yen, another safe-haven investment, shot higher, pressuring Tokyo’s main stocks index, which plunged 1.6 per cent. 

As trade tensions escalated, US indices shed more than one per cent in a bitter conclusion to a bruising May, the first month of 2019 with losses.

European stocks also ended solidly lower, while oil prices fell hard.

Trump’s latest tariff move amounted to “another log on the fire of global risk aversion,” analyst Joseph Manimbo of Western Union Business Solutions said in a client note.

“The news heightened fears of aggressive trade policy slowing growth in the US and globally, sending stocks and oil markets swooning, and investors ducking for cover in safer currencies like the yen, Swiss franc and greenback.”

Auto Shares Dented

Trump’s announcement late Thursday of a five per cent tariff on all goods from Mexico starting June 10, which will quickly ramp up to 25 per cent, was aimed at forcing the country to stem a flow of migrants from Central America crossing the southern US border.

Trump had only recently kick-started the process of ratifying a new North American trade pact by removing all tariffs on aluminium and steel, but he has now put the accord at risk, according to experts and key US lawmakers.

Carmakers were among the hardest hit by Trump’s announcement, with shares in Mazda plummeting 7.1 percent, Nissan tumbling 5.3 per cent, Renault shedding 4.3 per cent and Volkswagen losing 2.8 per cent.

General Motors slumped 4.3 per cent and Fiat Chrysler sank 5.8 per cent, while auto suppliers such as Delphi and Lear were also battered by the announcement.

Trump’s action comes amid a protracted trade war between the United States and China.

The tariff hike on US$200 billion (RM836 billion) in Chinese goods earlier this month “may already be undermining foreign demand,” analyst Julian Evans-Pritchard of consultancy Capital Economics wrote in a research note.

China is retaliating by raising tariffs onUS$60 billion worth of US goods today, while official data yesterday showed the Asian economic giant’s manufacturing activity contracted more than expected in May.

Beijing also announced Friday that it would release a list of “unreliable” foreign companies and individuals, striking back after the United States targeted telecom giant Huawei in their escalating trade war. — AFP