By David Randall
NEW YORK – The threat of a trade war sent many world stock markets broadly lower in choppy trading on Friday and boosted safer assets like the yen and government bonds, a day after U.S. President Donald Trump announced tariffs on up to $60 billion of Chinese goods.
Trump signed a presidential memorandum on Thursday that could impose tariffs on up to $60 billion of imports from China, although the measures have a 30-day consultation period before they take effect.
After another bruising week, a key gauge of world equity markets was broadly headed for their first quarterly loss since early 2016 as a spike in volatility, rising inflation and the specter of a trade war spooked investors who had enjoyed a multi-year bull run.
MSCI’s gauge of stocks across the globe shed 0.53 percent. The index has lost around 3.4 percent since Monday and was set for its worst week since early February when a spike in volatility had sent markets into a tailspin.
“The equity markets are getting clobbered, which is not that surprising with fears of a trade war breaking out,” said Paul Fage, a TD Securities emerging markets strategist.
On Wall Street, the benchmark S&P 500 stock index and the Dow were buoyed by gains in Nike, but the tech-heavy Nasdaq was weighed by losses in chip stocks led by Micron Technology.
The Dow Jones Industrial Average rose 67.35 points, or 0.28 percent, to 24,025.24, the S&P 500 gained 2.12 points, or 0.08 percent, to 2,645.81 and the Nasdaq Composite dropped 11.13 points, or 0.16 percent, to 7,155.55.
European stocks fell, with Germany’s Dax down 1.4 percent, the French CAC 40 1.3 percent lower and Britain’s FTSE 100 0.4 percent in the red.
That followed large declines in Asia, where the Nikkei tumbled 4.5 percent and the Hang Seng index lost 2.4 percent.
China urged the United States to “pull back from the brink,” but investors fear Trump’s tariffs are leading the world’s two largest economies into a trade war with potentially dire consequences for the global economy.
China disclosed its own plans on Friday to impose tariffs on up to $3 billion of U.S. imports in retaliation against U.S. tariffs on Chinese steel and aluminum products.
SAFETY
Amid the uncertain world economic climate, investors seeking safer assets jumped into government bond markets in Europe and the United States.
U.S. 10-year Treasury yields, which fell almost 8 basis points on Thursday, rose on Friday but were still set for their biggest two-week fall since November.
In Europe, benchmark issuer Germany’s 10-year bond yields hovered close to 10-week lows struck a day earlier at around 0.52 percent. While German bond yields recovered in European trading, they were still on track for their biggest two-week drop since November.
Many investors also turned to the Japanese yen, a currency likely to benefit from a full-fledged trade war.
The currency gained as much as 0.6 percent against the dollar to 104.635 yen, the first time it has been below 105 since November 2016. Investors later booked profits to leave the yen up 0.1 percent at 105.19 yen per dollar.
The Swiss franc, another currency bought in times of market uncertainty, rose 0.2 percent versus the dollar, although it fell against the euro.
The dollar index, tracking it against other major currencies, fell 0.36 percent.
U.S. crude rose 1.62 percent to $65.34 per barrel and Brent was last at $69.44, up 1.55 percent on the day.
(Editing by Bernadette Baum)
