Trade worries continue to dent global equities; yuan ‘steadies’

US markets closed for public holiday

LONDON, July 4, (Agencies): World stocks were flat on Wednesday amid growing anxiety ahead of Washington’s end of week deadline to impose tariffs on Chinese imports, while the yuan steadied after China’s central bank acted to calm investors.

The MSCI All-Country World index, which tracks shares in 47 countries, was lower by less than 0.1 percent on the day, recovering slightly from a 0.2 percent fall earlier.

Washington has said it would implement tariffs on $34 billion worth of Chinese imports on July 6, and Beijing has promised to retaliate in kind on the same day. However, China’s finance ministry said it will “absolutely not” fire the first shot in a trade war with the United States and will not be the first to levy tariffs.

Concerns about the outbreak of a global trade war have, among other factors, prevented a sustained recovery in global stock markets since a violent sell-off knocked them off records highs in February.

The pan-European STOXX 600 index was last down 0.1 percent, seesawing from positive to negative territory during the day. Germany’s exporter-heavy DAX fell half a percent and Britain’s FTSE 100 fell 0.3 percent.

A Chinese court temporarily banned Micron Technology from selling chips in China, the world’s biggest memory chip market, hitting shares in US stock overnight and Asian semiconductor stocks on Wednesday.

Europe’s tech sector was fell 1-1/2 percent led by falls in chipmakers STMicro and Infineon, which were down by nearly 8 percent and 2.5 percent respectively.

“The biggest risks to the technology sector are regulation and global semiconductor disruption from an escalating trade war,” Peter Garnry, head of equity strategy at Saxo Bank, said.

“At this point, the probabilities for both scenarios having major impacts on the technology sector in the short term are low,” Garnry said.

MSCI’s broadest index of AsiaPacific shares outside Japan fell 0.25 percent, a day after it hit a nine-month low. Japan’s Nikkei erased earlier losses to stand flat by late afternoon.

Mainland Chinese shares dropped, with CSI300 Index off 0.7 percent.

US markets were closed on account of the US Independence Day holiday.

In the currency market, the yuan bounced back from an 11-month low following moves by China’s central bank on Tuesday to calm jittery financial markets.

The Chinese currency fetched 6.6444 per dollar in onshore trade, off Tuesday’s low of 6.7204.

Major currencies were treading water as traders fretted about the fallout of the intensifying trade frictions between Washington and the rest of the world.

The euro was off by 0.1 percent at $1.16450 while the dollar was good for 110.52 yen, down 0.1 percent.

Brent oil prices rose, driven higher by a threat from an Iranian commander and a drop in US crude inventories for the second week in a row caused by an outage at a Canadian facility.

International benchmark Brent futures rose 0.1 percent to $77.84 a barrel.

US light crude futures traded down 0.3 percent at $73.89 per barrel, after rising above $75 for the first time in more than three years on Tuesday.

Copper, sometimes seen as a barometer of global economic strength given its wide use in power and construction, hit a fresh nine-month low of $6,381.50 a tonne on Wednesday.

UK

Britain’s top share index lost some ground on Wednesday, weighed down by weakness among miners and energy stocks, though investors cheered Sainsbury’s trading update.

The blue chip FTSE 100 index closed down 0.3 percent at 7,569.31 points, slightly underperforming a roughly flat European market.

A rise in the pound following betterthan-expected UK services PMI data also weighed on FTSE constituents that rely on dollar earnings.

Mining stocks weighed on the British index, with Rio Tinto , BHP Billiton and Antofagasta 2.3 percent to 2.7 percent lower as underlying metals prices continued to struggle, hit by concerns over trade tensions between the United States and China.

Likewise shares in big oil stocks BP and Royal Dutch Shell declined 0.2 and 0.5 percent respectively.

Trading more broadly has been choppy before a July 6 deadline when the United States is set to impose tariffs on $34 billion worth of Chinese goods.

“With just two days to go until the US-Sino trade war threats start to take effect, relations between the US and China remain hostile, rattling investors,” analysts at London Capital Group said in a note.

Among standout gainers, supermarket Sainsbury’s, rose about 3 percent after it gave an update on trading in its fiscal first quarter. Though sales growth slowed in its latest quarter, the 0.2 percent rise in like-for-like retail sales was ahead of analysts’ average forecasts.

Europe

European shares traded flat on Wednesday as worries over global trade persisted, with sentiment towards semiconductor stocks in particular souring after Micron Technology was banned from selling chips in China.

The pan-European STOXX 600 index closed flat with Germany’s exporter-heavy DAX and the UK’s FTSE 100 falling both 0.3 percent.

Trading has been choppy before a July 6 deadline when the United States is set to impose tariffs on $34 billion worth of goods from China.

The tit-for-tat saga has hit market sentiment in recent weeks. News a Chinese court temporarily banned Micron Technology from selling chips in China, the world’s biggest memory chip market, hit semiconductor stocks.

“The biggest risks to the technology sector are regulation and global semiconductor disruption from an escalating trade war,” Peter Garnry, head of equity strategy at Saxo Bank, said.

Europe’s tech sector fell 1.4 percent, the worst sectoral performance. Chipmaker STMicro was down 3 percent and Infineon 1.8 percent. Silicon wafer-maker Siltronic dropped 7 percent.

Recent guidance cuts from BE Semiconductor and Osram Licht have also weighed on sentiment around the sector, which has fallen more than 9 percent since June’s 17-year high.

Asia

Asian markets were down Wednesday as trade tensions between the US and China weighed on investor sentiment ahead of new tariffs kicking in.

Wall Street ended the session down in a shortened trading day ahead of Wednesday’s Independence Day holiday, with falls in tech stocks pressuring the market.

Concerns remain for Shanghai, which is down more than 20 percent from its January high on concerns about a slowing economy, even before new US tariffs threatened by Donald Trump kick in Friday.

China’s yuan is also under pressure, though it levelled after a rally on comments from central bank chief Yi Gang, who pledged to keep the exchange rate stable and avoid using the currency as a weapon in any trade war.

The unit has fallen around eight percent since the end of March, adding to fears about the economy as leaders struggle to cap massive debt while supporting growth.

In share trading, Hong Kong closed down 1.1 percent, extending a Tuesday sell-off that saw the market fall more than three percent at one point.

The benchmark Shanghai Composite Index also finished down 1.0 percent, with while Tokyo’s Nikkei was off 0.3 percent.

Tokyo traders were cautious about the trend in Chinese stocks but “with the prospects that the yuan’s depreciation is bottoming out... buying back supported the Japanese market later,” Okasan Online Securities strategist Yoshihiro Ito said in a commentary.

Zhang Gang, analyst at Cental China Securities warned that investors remain “worried that the US-China trade tensions could further escalate.”

“The market may not easily rebound before July 6th when things may become clearer.” Key figures around 0930 GMT Tokyo - Nikkei 225: DOWN 0.3 percent at 21,717.04 (close)

Shanghai - Composite: DOWN 1 percent at 2,759.13 (close)

Hong Kong - Hang Seng: DOWN 1.1 percent at 28,241.67 (close)

Dollar/yen: DOWN at 110.48 yen from 110.41 yen

Oil

Brent oil rose on Wednesday, driven higher by a threat from an Iranian commander and a drop in US crude inventories for the second week in a row caused by an outage at a Canadian facility.

The price was near session highs above $78 a barrel after an Iranian Revolutionary Guards commander said he was ready to prevent regional crude exports if Iranian oil sales were banned by the United States.

Brent crude futures were up 5 cents at $77.81 a barrel by 1431 GMT, while US crude futures were down 24 cents at $73.90 a barrel, paring gains after rallying by as much as 1.2 percent on Tuesday.

Trading is expected to be limited on Wednesday by a US national holiday, although the market has been more volatile.

Gold

Gold hit a one-week high on Wednesday, rebounding from this week’s seven-month low, helped by a softer dollar and smouldering trade tensions, though gains were limited by the prospect that rising interest rates will support the greenback.

The dollar fell versus the euro and the yuan, with the Chinese currency continuing its recovery from 11-month lows after the central bank took steps to stem its rapid rise.

A weaker dollar makes dollar-priced gold cheaper for non-US investors.

“Gold has been trending lower for several weeks and this being non-farm payrolls (week) the dollar is likely to remain in range, so people are taking profit on dollar and gold positions,” said Fawad Razaqzada, an analyst at FOREX.com.

“I’m still not convinced we’ve seen the lows so long as gold remains below $1,300. The dollar is on an upwards trajectory. I don’t think (looming US interest rate) hikes are fully priced into the dollar or gold.”

Spot gold was up 0.2 percent at $1,255.21 an ounce as of 1114 GMT after touching $1,261.10, a one-week high. The yellow metal has gained over $20 from Tuesday’s low of $1,237.32 an ounce, its weakest since Dec. 12.

US gold futures for August delivery were trading 0.2 percent higher at $1,256.30 an ounce.