Global stocks slide, yen jumps, as trade war fears grip
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[March 23, 2018]
By Tommy Wilkes
LONDON (Reuters) - The threat of a global
trade war sent stock markets sliding and investors rushing for the
safety of currencies like the yen and government bonds on Friday, after
U.S. President Donald Trump announced tariffs on up to $60 billion of
Another bruising week for stocks <.MIWD00000PUS> has left global equity
markets heading for their first quarterly loss since early 2016 after a
spike in volatility, nervousness about rising inflation and the specter
of a trade war spooked investors enjoying a multi-year bull run.
European stocks fell at the open, with Germany's Dax <.GDAXI> down 1.6
percent, the French CAC 40 <.FCHI> 1.5 percent lower and Britain's FTSE
100 <.FTSE> 0.6 percent in the red.
That followed large falls in the U.S., with the S&P 500 <.SPX> shedding
2.5 percent, and overnight in Asia, where the Japanese Nikkei 225
<.N225> was the biggest loser slumping 4.5 percent.
The MSCI World Index, down 3.4 percent since Monday, is on course for
its worst week since early February when a spike in volatility sent
markets into a tailspin.
Trump signed a presidential memorandum on Thursday that could impose
tariffs on up to $60 billion of imports from China, although the
measures have a 30-day consultation period.
China urged the United States to "pull back from the brink", but
investors fear Trump's tariffs are leading the world's two largest
economies into a trade war with potentially dire consequences for the
China disclosed its own plans on Friday to impose tariffs on up to $3
billion of U.S. imports in retaliation against the U.S. tariffs on
Chinese steel and aluminum products.
"The equity markets are getting clobbered, which is not that surprising
with fears of a trade war breaking out," said Paul Fage, a TD Securities
emerging markets strategist.
With investors seeking out safer assets, many jumped into government
bond markets in Europe and the United States.
U.S. 10-year Treasury yields <US10YT=RR>, which fell almost 8 basis
points on Thursday, were set for their biggest two-week fall since
September. In Europe, benchmark issuer Germany's 10-year bond yield
hovered close to 10-week lows struck a day earlier at around 0.52
percent <DE10YT=RR> and was on track for its biggest two-week drop since
August, down 13 basis points.
FLIGHT TO YEN
Many investors also turned to the yen, a currency likely to benefit from
a full-fledged trade war. The Japanese currency gained 0.3 percent
against the dollar to 104.95 <JPY=> yen, the first time it has been
below 105 since November 2016.
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The German share price index, DAX board, is seen at the stock
exchange in Frankfurt, Germany, March 21, 2018. REUTERS/Tilman
The Swiss franc, another currency bought in times of market uncertainty, rose
0.2 percent versus the dollar <CHF=>, although it remained flat against the euro
The dollar <.DXY> fell 0.2 percent against a basket of currencies.
"The FX market itself isn't sure, and its reaction to risk-off and lower bond
yields across the board is to buy the yen and the Swiss franc," Kit Juckes, an
FX strategist at Societe Generale, wrote in a daily note.
In commodity markets, oil prices recouped overnight losses after Saudi Arabia
said that OPEC and Russian-led production curbs introduced in 2017 will need to
be extended into 2019.
U.S. crude futures <CLc1> were up 0.3 percent at $64.48 per barrel after losing
1.3 percent on Thursday and Brent rose 0.45 percent to $69.22 before giving up
most of those gains <LCOc1>.
Safe-haven spot gold <XAU=> rose more than one percent to $1,342 an ounce, its
highest since Feb. 20. [GOL/]
Copper and iron prices both fell, as investors bet demand for the metals would
suffer in a trade war. MET/L <DCIOcv1>.
Daniel Lockyer, senior fund manager at Hawksmoor Investment Management, said
financial markets had got ahead of themselves and were failing to price in the
risk a number of factors could trigger a sell-off.
"It's not that we thought trade wars would cause the market to fall, it's that
there was too much optimism priced into stock markets," he said.
Elsewhere, South Africa's rand <ZAR=D3> firmed 0.4 percent and was set to end
the week up around 1.5 percent ahead of a decision by Moody's on the fate of
South Africa's last remaining investment grade credit rating.
For Reuters Live Markets blog on European and UK stock markets open a news
window on Reuters Eikon by pressing F9 and type in 'Live Markets' in the search
(Additional reporting by Dhara Ranasinghe, Helen Reid and Marc Jones in London,
editing by Larry King and Jane Merriman)
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