Threat of a full-blown trade war weighs on world’s stocks
OIL FALLS BY OVER 2% AS TRADERS FACTOR IN OUTPUT RISE AGREED BY MAJOR EXPORTERS
World stocks sank yesterday, hit by worries over a worsening trade dispute between the United States and other leading economies, while crude oil prices fell by over two per cent as traders factored in an output rise agreed by major exporters.
The Wall Street Journal said US President Donald Trump planned to bar many Chinese companies from investing in US technology firms and block additional technology exports to China.
The report hit Asian stocks overnight and in London the pan-European STOXX 600 index was down by one per cent by afternoon trade in London.
S&P500 mini futures fell as much as 0.6 per cent while MSCI’s broadest index of AsiaPacific shares outside Japan fell by one per cent to 6-1/2-month lows. Japan’s Nikkei lost 0.8 per cent.
Taking a particular hit on the trade tensions was the European autos sector, falling 1.9 per cent and set for its seventh straight day of losses after Trump said on Friday he aimed to hike tariffs on EU car imports by 20 per cent.
MSCI’s All-Country World index, which tracks shares in 47 countries, was down 0.3 per cent.
As the threat of a full-blown trade war has grown, the gauge has fallen in five of the last six weeks. Last week it fell one per cent — its biggest weekly drop in three months.
“We suspect the Trump team will push ahead with these policies (which will elicit reciprocal tariffs from China and the EU) until US equities start to crumble and polls move against Trump,” ING strategists wrote in a research note.
A spread between approval and disapproval ratings of the US President had reached its narrowest since March 2017, they noted.
China among biggest losers
Chinese shares were among the biggest losers, falling 1.27 per cent and tumbling 3.7 per cent last week, as Trump threatened to hit $200 billion of Chinese imports with 10 per cent tariffs.
Policymakers in China moved fast to temper any potential economic drag from the dispute, as its central bank said on Sunday it would cut the amount of cash some banks must hold as reserves by 50 basis points.
Despite the move, the CSI300 Index of mainland Chinese shares lost 0.8 per cent, edging near the one-year low it touched on Friday.