World stocks slide, yen jumps, as trade
war fears grip markets
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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
World stocks <.MIWD00000PUS>, down 3.4 percent since Monday, are on
course for their worst week since early February, when a spike in
volatility sent markets into a tailspin.
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> 0.8 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.
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
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
Many investors also turned to the yen, a currency likely to benefit from
a full-fledged trade war. The Japanese currency gained 0.4 percent
against the dollar to 104.87 <JPY=> yen, the first time it has been
below 105 since November 2016.
The Swiss franc, another currency bought in times of market uncertainty,
rose 0.3 percent versus the dollar <CHF=>, although it remained flat
against the euro <EURCHF=>.
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A man is seen against an electronic board showing stock information
at a brokerage house in Hangzhou, Zhejiang province, China March 23,
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
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 0.8 percent at $64.79 per barrel
after losing 1.3 percent on Thursday and Brent gained 0.45 percent
to $69.22 <LCOc1>.
Safe-haven spot gold XAU= rose 1 percent to $1,341 an ounce, 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
"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
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(Additional reporting by Dhara Ranasinghe, Helen Reid and Marc Jones
in London, editing by Larry Kinig)
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