Share prices extended their slide across the globe on Friday after U.S. President Donald Trump announced new tariffs on Chinese goods, while oil prices plummeted 3 per cent over signs that supply may soon rise.
Mr. Trump announced hefty tariffs on $50-billion of Chinese imports on Friday, with Beijing threatening to respond in kind, stoking fears of a trade war between the world’s two biggest economies.
Mr. Trump unveiled a 25-per-cent tariff on a list of strategically important imports from China, promising further measures if Beijing struck back.
Energy and material stocks weighed on Canada’s main stock index on Friday.
The S&P/TSX composite index finished down 14.54 points, or 0.09 per cent, at 16,314.42.
Energy stocks fell 1.5 per cent with Encana Corp. losing 3.3 per cent and Vermilion Energy Inc. down 2.9 per cent.
Materials stocks dipped 1.3 per cent. Teck Resources Ltd. fell 5.3 per cent, while First Quantum Minerals Ltd. lost 4 per cent.
Leading the index were Canada Goose Holdings Inc., up 30 per cent in the wake of its quarterly results, Paramount Resources Ltd., up 4 per cent, and Prometic Life Sciences Inc., higher by 3.3 per cent.
MSCI’s gauge of stocks across the globe shed 0.64 per cent, while the pan-European FTSEurofirst 300 index lost 1.00 per cent.
Emerging market stocks were hit particularly hard, tumbling 1.12 per cent, a move maybe attributable as much to a strong dollar as to trade tensions.
“I think the biggest concern at the moment, more than talk about trade, is the tightening of monetary conditions in emerging markets caused by a stronger dollar,” said Michael Hewson, chief markets analyst at CMC Markets in London, noting the Federal Reserve’s forecast for a total of four interest rate rises in 2018.
Mr. Trump’s decision on tariffs comes a day after stock markets had rallied on the European Central Bank’s decision to hold off on raising rates at least until the middle of next year.
U.S. share indexes opened lower on the impending tariffs and kept sliding afternoon trading.
Based on the latest available data, the Dow Jones Industrial Average fell 84.83 points, or 0.34 per cent, to 25,090.48, the S&P 500 lost 3.07 points, or 0.11 per cent, to 2,779.42, and the Nasdaq Composite dropped 14.66 points, or 0.19 per cent, to 7,746.38.
The outbreak of a global trade war has been the most frequently cited ‘biggest tail risk’ by investors this year in Bank of America Merrill Lynch’s monthly survey of global fund managers, on the back of ramped up protectionist rhetoric and measures by the U.S. administration.
It is not clear when Mr. Trump will activate the measures, but rising Sino-U.S. tensions will put more pressure on China’s economy, which is starting to show signs of cooling.
MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.65 per cent lower, with Chinese stocks leading the losses.
World oil markets cratered on fears of increased supply, with U.S. Crude on track for its biggest decline since May 15, and to end the week down 1.3 per cent. Brent was on track for a 4-per-cent loss on the week.
The Organization of Petroleum Exporting Countries is slated to meet next week in Vienna, with two of the biggest producers - Saudi Arabia and Russia - indicating they were prepared to increase output.
“Everyone is talking about raising production - the only question is by how much,” said Bob Yawger, director, energy at Mizuho in New York.
U.S. crude settled at $65.06 per barrel, down 2.74 per cent, while Brent was last at $73.37, down 3.38 percent.
In currencies, the U.S. dollar slipped against the safe-haven yen in the wake of the announced tariffs, while the dollar index , which measures the greenback against six currencies, fell 0.02 per cent.
The euro , which on Thursday had suffered its biggest fall against the dollar in two years after the ECB’s interest rate decision, rose 0.38 per cent to $1.1611.
Trade fears drove demand for safe government bonds, causing U.S. Treasury yields to fall to their lowest levels in a week. Benchmark 10-year notes last rose 10/32 in price to yield 2.9095 percent, from 2.946 percent late on Thursday.
The 30-year bond last rose 21/32 in price to yield 3.0323 per cent, from 3.066 per cent Thursday.
“You’ve seen a little bit of a risk-off trade, which is aiding in the Treasury rally,” said Justin Lederer, an interest rate strategist at Cantor Fitzgerald in New York.
Reuters