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While you were sleeping: Trump’s tariffs sink Wall St

Friday 2nd March 2018

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Wall Street declined, while Treasuries rose, after US President Donald Trump said the US will impose tariffs on steel and aluminum imports next week.

Shares of the nation’s steel and aluminum companies including US Steel jumped after Trump said the US will impose tariffs of 25 percent on steel imports and 10 percent on aluminum.

Investors were also digesting clues on the outlook for US interest rates. In testimony to the the Senate Banking Committee, Federal Reserve Chairman Jerome Powell said the central bank plans to “gradually raise interest rates,” adding that “there’s no evidence the economy is currently overheating.”   

In 1.28pm trading in New York, the Dow Jones Industrial Average dropped 1.1 percent, while the Nasdaq Composite Index shed 0.8 percent. In 1.13pm trading, the Standard & Poor’s 500 Index slid 1 percent. 

US Treasuries gained, pushing the yield on the 10-year note two basis points lower to 2.84 percent.

“In many ways, the Fed is going to be considering things against a backdrop of an economy that’s expanding above trend with excess demand and no spare capacity, and against a backdrop of pretty strong fiscal stimulus,” David Page, senior economist at AXA Investment Managers, told Bloomberg. “The Fed is actually going to be wondering whether or not four rate hikes are going to be enough this year.”

A Commerce Department report showed US consumer prices as measured by the personal consumption expenditures price index gained 0.4 percent in January, the fastest pace since September, after a 0.1 percent increase in December. 

"January’s personal income and spending data shows underlying inflation accelerating again, although real consumption growth is weakening even with the boost to incomes from the tax cuts," Capital Economics economist Paul Ashworth said in a note. 

The core PCE deflator increased by a sizeable 0.3 percent month over month in January and, although the annual core inflation rate was unchanged at a muted 1.5 percent, the three-month annualised rate jumped to an 11-month high of 2.1 percent, Ashworth noted.

The Dow fell, led by declines in shares of United Technologies and those of Boeing, recently down 2.9 percent and 2.8 percent respectively.

Shares of Verizon and those of Merck, recently up 0.8 percent and 0.02 percent respectively, were the only stocks in the Dow to post gains as of early afternoon trading. 

In Europe, the Stoxx 600 Index finished the session with a 1.3 percent decline from the previous close. The UK’s FTSE 100 index fell 0.8 percent, France’s CAC40 Index gave up 1.1 percent, while Germany’s DAX Index retreated 2 percent. 

Shares of France’s Carrefour dropped, closing 6 percent weaker in Paris, after Europe’s top retailer reported a slide in operating profit and a slowdown in sales growth, fuelling concern about the outlook and its ability to deliver on its turnaround plan. 

“The 2017 results that we are presenting today demonstrate the necessity of implementing without delay Carrefour’s transformation plan," Alexandre Bompard, chief executive officer of Carrefour, said in a statement. 

The company also slashed its dividend by a third.

"The strategic plan announced by the new management is sensible and ambitious," Barclays analysts, according to Reuters. "However, most of these strategic initiatives will start to have an impact on Carrefour's performance from 2019 only, while the group will continue to evolve in a tough environment in most countries.”

Bucking the trend, shares of Anheuser-Busch InBev climbed after the world’s No. 1 maker of beer reported quarterly sales and profit that bettered expectations bolstered by its acquisition of SAB Miller and a rebound in Brazil.

"In addition to the synergy capture from one of the largest business combinations in history, we rebounded in Brazil and continued to reshape the portfolio in the US in order to reach consumers in more occasions," the owner of Budweiser, Stella Artois and Corona said in a statement.

The stock closed 2.2 percent stronger at 89.43 euros in Brussels. Earlier in the day it climbed as high as 92.93 euros. 

“While recognising volatility in some of our key markets, we expect to continue to deliver strong revenue and EBITDA growth in FY18, driven by the solid performance of our brand portfolio and strong commercial plans”, the company said. “ We expect a softer 1Q18 as a result of a tough comparable and the phasing of sales and marketing initiatives, but are confident that growth will accelerate for the balance of the year.”


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