Specter of Full Trade War Returns to Batter Stocks: Markets Wrap - Bloomberg

Specter of Full Trade War Returns to Batter Stocks: Markets Wrap

April 4, 2018, 8:35 AM GMT+10 Updated on April 4, 2018, 8:36 PM GMT+10
U.S. equity futures slump as protectionist moves intensify
Treasuries, European bonds advance; yen gains with gold
China’s response to U.S. tariffs is "smaller than it could have been," says Algebris’s Alberto Gallo.
Fears of a trade war between the world’s two largest economies returned to haunt markets on Wednesday, sending U.S. stock futures tumbling and sinking European and Asian equities. Treasuries climbed while the dollar was steady, and gold jumped.

Hopes that Tuesday’s gains in U.S. equity markets would lead to a more lasting rebound foundered as contracts for the S&P 500, Nasdaq 100 and Dow all slumped alongside both the Stoxx Europe 600 Index and the MSCI Asia Pacific Index. China said it would levy 25 percent tariffs on imports of 106 U.S. products including soybeans, automobiles, chemicals and aircraft, in response to proposed American duties on its high-tech goods. Safe-haven assets including bullion and the Japanese yen rallied, while European bonds tracked the jump in Treasuries.

Terminal users can follow the escalating trade tensions in our live blog.

Markets have been buffeted in recent weeks by everything from a volatility spike and a tech selloff to fears of an all-out trade war, and developments on Wednesday suggest there may be more turbulence to come. Investors are having to weigh the growing protectionist rhetoric between the U.S. and China against the chances of measures having a meaningful effect on the still-upbeat global growth picture.

“Trade uncertainty is the main headwind to the market,” Charles St-Arnaud, an investment strategist at Lombard Odier Asset Management in London, said by phone. “At this juncture we need to be careful. The macro picture hasn’t changed massively yet. Growth remains robust, unless we go into a bigger trade war.”

The trade spat won’t escalate and earnings will stay on track, says JPMorgan Asset Management’s Karen Ward.

Source: Bloomberg
Elsewhere inflation data from Europe matched estimates, and the euro stayed higher. West Texas oil fell as commodities were roiled by the growing trade dispute, while emerging-market stocks tumbled and their currencies dropped.

“This is a tricky one for markets,” said Thomas Thygesen, SEB AB’s head of cross-asset strategy in Copenhagen. “This inherent unpredictability will weigh on global economic growth. Sentiment is quite negative and the one thing that could change this is some sort of signal from central banks that they are willing to adapt their hawkish tone.”

Here are some key events coming up this week:

U.S. employment data are due Friday; the jobless rate probably fell in March after holding at 4.1 percent for five straight months.
The Reserve Bank of India decides on policy Thursday.
These are the main moves in markets:

Stocks
The Stoxx Europe 600 Index sank 1.2 percent as of 11:33 a.m. London time on the largest tumble in almost two weeks.
Futures on the S&P 500 Index declined 1.9 percent to the lowest in more than five months.
The MSCI All-Country World Index dipped 0.4 percent.
The U.K.’s FTSE 100 Index sank 0.7 percent to the lowest in more than a week on the biggest dip in almost two weeks.
Germany’s DAX Index sank 1.7 percent to the lowest in more than a week on the largest tumble in more than a week.
The MSCI Emerging Market Index fell 1.7 percent to the lowest in almost eight weeks on the biggest fall in a week.
The MSCI Asia Pacific Index fell 0.6 percent to the lowest in almost eight weeks.
Currencies
The Bloomberg Dollar Spot Index increased less than 0.05 percent to the highest in a week.
The euro gained 0.1 percent to $1.2284.
The British pound fell 0.1 percent to $1.4037.
The Japanese yen jumped 0.5 percent to 106.06 per dollar, the largest climb in almost two weeks.
Bonds
The yield on 10-year Treasuries declined two basis points to 2.75 percent.
Germany’s 10-year yield dipped two basis points to 0.48 percent, the lowest in 12 weeks.
Britain’s 10-year yield declined two basis points to 1.359 percent, the lowest in almost 11 weeks.
Commodities
West Texas Intermediate crude decreased 1.9 percent to $62.31 a barrel, the lowest in more than two weeks.
Copper sank 2.5 percent to $2.99 a pound and the biggest tumble in eight weeks.
Gold increased 0.8 percent to $1,343.36 an ounce, the highest in more than a week.
The Bloomberg Commodity Index decreased 1.3 percent to 85.91, the lowest in almost eight weeks on the biggest tumble in almost eight weeks.
— With assistance by Andreea Papuc, Sofia Horta E Costa, and Sheldon Reback