Thursday 5th April 2018
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Wall Street slid amid concern about the latest moves towards a potential trade war between the US and China.
China announced additional tariffs on about US$50 billion of US imports including aircraft, cars and soybeans, following US administration plans, announced on Tuesday, to levy duties on about the same amount of Chinese imported goods.
“At the very beginning, the reaction was what we fear, ‘It’s a tit-for-tat and does that escalate?’,” Art Hogan, chief market strategist at B Riley FBR in Boston, told Reuters. “The market has stepped back. The good news is China didn’t escalate the retaliation. They came back dollar for dollar and that’s fair and balanced, that’s a reciprocal response.”
In 1.28pm trading in New York, the Dow Jones Industrial Average slid 0.6 percent, while the Nasdaq Composite Index fell 0.3 percent. In 1.14pm trading, the Standard & Poor’s 500 Index retreated 0.2 percent.
US Treasuries slipped, lifted yields on the 10-year note one basis point higher to 2.78 percent.
“We are not in a trade war with China, that war was lost many years ago by the foolish, or incompetent, people who represented the US,” US President Donald Trump tweeted. “Now we have a Trade Deficit of $500 Billion a year, with Intellectual Property Theft of another $300 Billion. We cannot let this continue!”
US Federal Reserve officials said the trade dispute adds to uncertainty, including about the interest rate outlook.
“It increases the uncertainty around the forecast,” St Louis Fed President James Bullard told reporters Wednesday in Little Rock, Arkansas, Bloomberg reported. “It does present some downside risk, but generally speaking it is too early to tell what the actual impact will be on the US economy.”
“I would see more uncertainty keeping longer rates lower than they would otherwise be,” said Bullard. “Therefore that could feed back to policy and possibly keep short rates lower than they otherwise would be as well.”
The Dow moved lower as declines in shares of Boeing and those of Caterpillar, down 2.7 percent and 1.9 percent respectively, outweighed advances in shares of Nike and those of Coca-Cola, recently up 1.6 percent and 1.3 percent respectively.
“Trade war headlines create a lot of noise, spooking fast money,” Guillermo Hernandez Sampere, head of trading at MPPM EK in Eppstein, Germany, told Bloomberg. “Many investors are waiting for the final market ‘puke’ and, until then, it’s fast money selling roller-coaster tickets.”
In Europe, the Stoxx 600 Index ended the day with a 0.7 percent slide from the previous close. Germany’s DAX Index gave up 0.4 percent, while France’s CAC40 Index fell 0.2 percent.
“This war is clearly between the US and China, but investors fear broad consequences for exporting markets like Germany, that’s why the DAX is taking another beating today,” Stephane Ekolo, equity strategist at TFS Derivatives, told Bloomberg. “It brings a lot of uncertainty and it comes just when the macro data start to lose steam in Europe.”
The UK’s FTSE 100 Index rose 0.1 percent.
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