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Monday 18

June, 2018 1:56 PM



World stocks fall as US announces steep tariffs

World stocks fall as US announces steep tariffs

World stocks fell Thursday as harsh US steel and aluminum tariffs sparked renewed fears of a global trade war.

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01.06.2018 08:03 AM

World stocks fell Thursday as harsh US steel and aluminum tariffs sparked renewed fears of a global trade war.

Washington said it will impose the tariffs on metals imports from the European Union, Canada, Mexico at midnight (0400 GMT Friday).

The announcement by Commerce Secretary Wilbur Ross immediately drew retaliatory action by Mexico, Canada and threats of the same by the EU, while France called the tariffs "illegal."

US stocks finished solidly lower, with the S&P 500 shedding 0.7 percent and most sectors ending in the red.

Key European markets also fell, having earlier been on the path to recovery as investors took a more sanguine view of an ongoing political crisis in Italy.

Asian equities bounced back from Wednesday's mauling as fears of turmoil in Italy were soothed by conciliatory noises from the country's two biggest populist parties.

- 'Posturing' or policy? -
US companies heavily leveraged to international trade, including Caterpillar and Boeing were among the biggest losers in the Dow, shedding 2.3 percent and 1.7 percent, respectively.

Yet the market's overall losses, while not insignificant, were also well below those suffered on the worst trading days earlier this spring.

"Yes there are some pretty ominous headlines, but the market is taking it pretty well," said Jack Ablin of Cresset Wealth Advisors. 

"There is somewhat of a credibility issue with this administration just because they continuously change their tack all the time," Ablin added. "Investors believe that most of it is posturing and is not policy."

Yet some observers are sounding an alarm bell following the US action, which follows earlier Trump moves to pull the US out of the Paris climate accord and the Iran nuclear agreement, other trade frictions with China, and potential tariffs on auto imports.

Carl Weinberg, chief international economist at High Frequency Economics, said next week's Group of Seven Summit could be a turning point.

"We are watching for an outright fracture of Group and the G-7 process with the six splitting off from the highly variable and incendiary policies of the United States," Weinberg said in a note. "Europe in particular is dismayed by recent US diplomatic and economic behavior."

G7 finance ministers also will work this issue during their meeting this week.

Deutsche tumbles

In Frankfurt, shares in Deutsche Bank fell sharply, losing seven percent at the close, after the US Federal Deposit Insurance Commission classified the German lender among its "problem banks" according to a person familiar with the matter.

The designation adds to the woes facing the big German bank, which also was downgraded to "troubled condition" by the Federal Reserve, the Wall Street Journal reported.

General Motors powered 12.9 percent higher after it announced that Japanese telecom giant SoftBank will invest $2.25 billion in the company's autonomous car program.

Investors are looking forward to the release Friday of key US jobs figures, which could provide some idea about the Federal Reserve's plans for raising interest rates.

Analysts expect the US added 190,000 jobs in May and while the unemployment rate held steady at 3.9 percent.

Payrolls firm ADP estimated US private sector job growth at 178,000 in May, down from 204,000 in April and slightly below analysts' expectations.

Key figures around 2100 GMT

New York - Dow Jones: DOWN 1.0 percent at 24,415.84 (close)

New York - S&P 500: DOWN 0.7 percent at 2,705.27 (close)

New York - Nasdaq: DOWN 0.3 percent at 7,442.12 (close)

London - FTSE 100: DOWN 0.2 percent at 7,678.20 (close)

Milan - FTSE MIB: DOWN 0.1 percent at 21,784 (close)

Paris - CAC 40: DOWN 0.5 percent at 5,398.40 (close) 

Frankfurt - DAX 30: DOWN 1.4 percent at 12,604.89 (close) 

EURO STOXX 50: DOWN 0.8 percent at 3,415.36 (close)

Tokyo - Nikkei 225: UP 0.8 percent at 22,201.82 (close)

Hong Kong - Hang Seng: UP 1.4 percent at 30,468.56 (close)

Shanghai - Composite: UP 1.8 percent at 3,095.47 (close)

Euro/dollar: UP at $1.1695 from $1.1665 at 2100 GMT

Pound/dollar: UP at $1.3293 from $1.3286

Dollar/yen: DOWN at 108.81 yen from 108.91 yen

Oil - Brent Crude: UP 9 cents at $77.59 per barrel

Oil - West Texas Intermediate: DOWN $1.17 cents at $67.04 per barrel
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