Trade war may kill off bull market, banks warn

Investors told to pull out of cyclical stocks as Beijing insists it is prepared for ‘protracted’ tariff conflict

DONALD TRUMP’S escalating trade war with China and the EU is poised to put an end to the nearly decade-long bull run in equity markets, investors were warned yesterday as HSBC became the latest global company to admit fears over tariffs.

The wealth management arm of the Swiss investment bank UBS said the East-west conflict has reached a “tipping point” and urged action by its clients.

Trade tensions are likely to escalate, UBS said as it warned investors to move their money out of “cyclical stocks”. It told clients to hedge currency holdings to guard against potential sudden fluctuations caused by further tariffs.

“Following the worsening of the global trade conflict, UBS has cut its position on global equities,” it said. The investment bank’s wealth management arm oversees $2.4 trillion (£1.85 trillion) of assets.

The stark warning came as HSBC said escalating tariffs have the potential to trigger a slowdown in China and damage its business.

The chief executive, John Flint, said a “full-blown trade war” would “of course” impact the lender. It has been shifting resources to China over the past few years and now generates almost 90pc of its profits from the conti- nent. HSBC’S results disappointed the City yesterday, with adjusted pre-tax profits – which strip out one-off costs – down 2pc to $12.1bn.

This was due to an 8pc rise in operating costs to $16.4bn.

At the same time, Beijing warned it was ready to endure a “protracted” trade war last night after lining up $60bn of new tariffs on US goods in recent days. An editorial in a Chinese Communist Party newspaper, seen as a mouthpiece of the government, said that the US had “lost its mind on trade”.

President Trump told supporters on Saturday trade tensions are “my thing”.

The impact of the tariffs imposed to date is already being felt widely. Fresh data from German manufacturers suggested that trade tensions had driven a slowdown in the sector.

US farmers have suffered falls in the price of their soya beans and pork as a result of Chinese retaliation. Mr Trump’s offer of a $12bn bail-out fund has been met by agricultural lobby calls for tariffs to be dropped instead.

Brewers in Canada have said they are unable to source sufficient aluminium in order to package their beer, potentially forcing them out of business.

Geoffrey Yu of UBS wealth manage- ment said Beijing had avoided direct attacks on Mr Trump to ensure channels of communication remain open.

However, the lack of public intervention in the dispute by figures such as Vice President Wang Qishan has been interpreted by seasoned observers as a sign that little progress is being made behind closed doors.