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World stocks fall as US announces steep tariffs
NEW YORK, June 1, 2018 (BSS/AFP) – 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.
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“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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