Escalating trade fight weighs on global stocks, boosts Treasuries

Escalating trade fight weighs on global stocks, boosts Treasuries

NEW YORK,. Global stock markets sank yesterday as the trade fight between the United States and other top economies escalated, and benchmark Wall Street indexes suffered their worst losses in more than two months while safe-haven investments gained.

US Treasury Secretary Steven Mnuchin yesterday said forthcoming investment restrictions would apply “to all countries that are trying to steal our technology,” not just to China.

Hours later, White House trade and manufacturing adviser Peter Navarro walked back Mnuchin’s remarks, telling CNBC that the restrictions on investing in tech companies would just target China.

“People are scared,” said Wayne Kaufman, chief market analyst at Phoenix Financial Services in New York. “The market does not like uncertainty, and a trade war is something that is difficult, if not impossible, to handicap.”

On Wall Street, the Dow Jones Industrial Average fell 328.09 points, or 1.33 per cent, to 24,252.8, the S&P 500 lost 37.81 points, or 1.37 per cent, to 2,717.07, and the Nasdaq Composite dropped 160.81 points, or 2.09 per cent, to 7,532.01.

The pan-European FTSEurofirst 300 index lost 2.19 per cent and MSCI’s gauge of stocks across the globe shed 1.41 per cent.

Technology stocks bore the brunt of the damage. The S&P technology index fell 2.3 per cent, the most among the major S&P 11 sectors.

Policymakers in China moved quickly to temper any potential economic drag from Beijing’s dispute with the United States. Its central bank said on Sunday it would cut the amount of cash some banks must hold as reserves by 50 basis points to spur lending to smaller firms.

The European autos sector was hit by trade tensions between Washington and Europe, falling 2.4 per cent in a seventh straight day of losses after US President Donald Trump said on Friday he aimed to hike tariffs on European Union car imports by 20 per cent.

The index of global auto manufacturers fell 1.5 per cent.

A senior European Commission official said on Saturday the European Union would respond to any US move to raise tariffs on cars made in the bloc.

Harley-Davidson Inc said yesterday it would move production of motorcycles shipped to the European Union from the United States to its international facilities and forecast the trading bloc’s retaliatory tariffs would cost the company US$90 million (RM361 million) to US$100 million a year.

The growing disputes have led investors to take refuge on safer ground.

Benchmark US 10-year Treasury notes gained 5/32 in price to yield 2.884 per cent, down from 2.900 per cent late on Friday. The yield curve between 2-year and 10-year notes flattened to 33 basis points, the lowest level since 2007.

Gold hovered near last week’s six-month low as investors chose Treasuries over bullion.

Oil fell as investors prepared for an extra 1 million barrels per day in output to hit the markets after Opec and its partners agreed to raise production.

US crude fell 0.73 per cent to settle at US$68.08 per barrel and Brent settled at US$74.73, down 1.09 per cent on the day.

In the currency market, the dollar index fell 0.22 per cent, with the euro up 0.38 per cent to US$1.1699.

The Japanese yen strengthened 0.21 per cent versus the greenback, at 109.74 per dollar, while sterling was last trading at US$1.3279, up 0.08 per cent.

The Turkish lira rose on expectations of a stable government after Tayyip Erdogan and his ruling AK Party claimed victory in presidential and parliamentary polls.

Bitcoin steadied after hitting seven-month lows over the weekend as the security of cryptocurrency exchange operators came under more scrutiny.

? Reuters