China-US trade conflict: global markets see red
Overwhelmed by the resumption of the Sino-US trade dispute, relaunched without warning by Donald Trump, stock indexes were unfolding Friday and safe havens, such as gold or German debt, were blazing.
“Anyone who wants to qualify market movements in the last 24 hours would be entitled to say that he has just experienced the” whiplash, “summarized Michael Hewson, an analyst at CMC Markets. “European markets sank like stones” this morning and “China’s threats of retaliation have accentuated the downward movement”.
In markets barely recovered from a meeting of the US Federal Reserve, not enough accommodating to their liking, the US President has set fire to the pest, saying that his administration was to impose, from September 1, tariffs additional 10% of the US $ 300 billion of Chinese imports hitherto spared.
These statements first touched Thursday Wall Street, still open, before spreading on Friday to Asia, where Tokyo has dropped by 2.1% and the European markets.
The Chinese reply was not long, Beijing threatening Friday to take retaliatory measures.
While the bright red already dominated in Europe, the decline was accentuated during the morning. At approximately 1:15 pm (7:15 am, Québec time), the Paris Bourse lost 2.69%, London 1.64% and Frankfurt 2.33%.
At the forefront of international trade, raw materials and the automobile paid a heavy price, like ArcelorMittal in Paris, Glencore in London, Peugeot and Renault in France or BMW in Frankfurt. Semiconductors were not spared either, like STMicroelectronics on the CAC 40 or Infineon on the Dax.
And Wall Street seemed to be on the brink again, since around 1:30 pm (7:30 am Quebec time) the futures of the big US indices, which give a good indication of what the trend toward opening up, were clearly in red too.
“It is not difficult to understand how much this sudden escalation took the markets of short,” even as they hoped that “the resumption of negotiations would result in at least a short period of ceasefire,” Hewson added.
“It’s hard to understand what the president has in mind,” he said, “since these tariffs are likely to hit its base, since the products involved include US consumer essentials like toys, clothing or appliances “.
German debt in the abyss
In any case, his action could further weaken the dollar, as he wishes, according to the expert.
The greenback has clearly lost ground against the euro since Thursday night. Friday at midday, the European currency climbed to 1,1101 dollars against 1,1085 the day before.
“The new tariffs could be a blow to the Fed from Donald Trump, who felt” his policy “was not accommodative enough, and push” to further lower rates in the next meeting, “said Christopher Dembik, head of economic research at Saxo Bank.
The US central bank lowered its rates by a quarter of a percentage point on Wednesday, but Donald Trump, who had called for a “sharp” drop, had reacted quickly by expressing his disappointment.
Assets considered as refuges in case of agitation, conversely, were largely favored by anxious investors.
The yen appreciated strongly, as did gold, which hit a high since 2013 at 1450.30 dollars an ounce.
In the bond market, the US 10-year borrowing rate was well below 2%, at 1.850% around 1:15 pm, the lowest since November 2016.
In Europe, that of Germany, the “Bund” that serves as a reference to the market, never ceased to sink into negative territory, again setting records beyond -0.5%.