Stocks, emerging markets tumble on trade war fears
london — World stocks and emerging markets fell for the fifth straight day on Monday, hammered by fears of a global trade war and the prospect of political instability in Europe after inconclusive elections in Italy.
Assets considered low-risk — including gold, the yen and German bonds — were in heavy demand, with yields on the latter at the lowest in a month.
“There is nothing in the global setup that’s positive for equities at the moment especially as (share) prices are still out of whack with latest developments,” said Salman Ahmed, chief investment strategist at Lombard Odier Investment Managers.
US President Donald Trump last week sent world markets lower after threatening hefty tariffs on steel and aluminium imports, sparking threats of retaliatory action from trade partners worldwide.
On Sunday, Italian voters delivered a hung parliament, flocking to anti-immigrant and eurosceptic parties in record numbers in a development seen as a setback to stability and wider European integration.
Italian stocks were down 1 per cent at six-month lows, though broader European markets reversed opening losses to trade marginally higher. MSCI’s allcountry equity index slipped 0.2 per cent after emerging Asian and Japanese shares fell more than 0.7 per cent. Emerging shares took the biggest beating, falling almost one per cent to three-week lows. Ahmed said developments in Italy represented a “a medium to small shock” with implications for asset prices, while the risk of trade wars was a far bigger issue.
Canada and Mexico have threatened retaliation, and the European Union said it would apply 25 per cent tariffs on about $3.5 billion of US imports if Trump carried out his threat. China too said it would defend its interests. “Markets are not priced for trade wars and now you are also seeing a negative reaction to the US moves from Europe and Canada,” Ahmed said.
India’s benchmark equity index reopened after a local holiday on Friday and clocked its steepest decline in over three weeks as investors weighed the potential impact of US plans to impose stiff tariffs.
The benchmark S&P BSE Sensex fell for a fourth session, slipping 0.9 per cent to 33,746.78 in Mumbai. The NSE Nifty 50 Index was down 1 per cent at 10,358.85.