A sense of calm returned to global markets yesterday, as traders took a break from worrying about a global trade war and focused instead on the European Central Bank’s plans to end its €2.5 trillion stimulus programme.
European, US and Asian share markets all edged up – the first two for a fourth day – after US President Donald Trump suggested he may spare some key trade partners in his push to introduce protectionist tariffs.
The euro lingered in the red though, as a bigger-than-expected drop in German industrial orders and then a subdued ECB inflation forecast added to the weekend’s inconclusive Italian election, reinforcing caution.
The central bank did, however, drop an explicit promise on its bond buying, which has been running for three years, and there was some pointed criticism from ECB chief Mario Draghi for Trump’s plans for more trade tariffs.
“If you put tariffs against [those] who are your allies, one wonders who the enemies are,” he said.
Wall Street opened higher just after Mr Draghi spoke and the dollar was up marginally too.
Highlighting the strength of the global economy, Chinese data showed both exports and imports rose more than 20 per cent in the first two months of this year from a year earlier.
In the currency market, the dollar stabilised against other major currencies after its hit from fears about the tariff plan, while the Mexican peso and Canadian dollar recovered from steep losses.
The euro traded down at $1.2377, having risen to $1.2447 on Wednesday, its highest since February 16. The currency has been rising since it hit a seven-week low of $1.2154 when Trump unveiled his tariff plan last week.
Bond markets were steady with 10-year US Treasury yields stuck at 2.87 per cent and Germany’s benchmark barely budged at 0.67 per cent having hit a five-week low of 0.60 per cent on Monday.
Draghi wasn’t the only one in Europe to express concerns about Trump’s plans. European Financial Affairs Commissioner Pierre Moscovici said Europe was preparing immediate counter-measures in case of a trade skirmish.
“If Donald Trump puts in place the measures this evening, we have a whole arsenal at our disposal with which to respond,” Moscovici told BFM TV yesterday.
The dollar traded at 106.17 yen, little changed in Europe, keeping some distance from its 16-month low of 105.24 touched last Friday.
In commodities, oil prices inched back after falling more than two per cent the previous day on record US crude production.
US West Texas Intermediate crude futures were just under $61 a barrel, down 0.3 per cent, while benchmark Brent was 0.5 per cent lower at $64 a barrel.