World shares fell yesterday after United States President Donald Trump announced new tariffs that sparked fears of a trade war between the US and China, 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 yesterday, with Beijing threatening to respond in kind, in a move that could ignite 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.
MSCI’s gauge of stocks across the globe shed 0.59 per cent, while the pan-European FTSEurofirst 300 index lost 0.76 per cent.
Emerging market stocks were hit particularly hard, tumbling 1.20 per cent, a move maybe attributable as much to a strong dollar as to trade tensions.
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.
US share indexes were feeling the hit from the impending tariffs in early trading.
The Dow Jones Industrial Average fell 206.32 points, or 0.82 per cent, to 24,968.99, the S&P 500 lost 10.85 points, or 0.39 per cent, to 2,771.64 and the Nasdaq Composite dropped 27.06 points, or 0.35 per cent, to 7,733.98.
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 US administration.
It is not clear when Mr Trump will activate the measures, but rising Sino-US 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 in early trading on fears of increased supply, with US crude down 2.8 per cent to $65.02 per barrel and Brent last at $73.55, down 3.15 per cent.
The Opec 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.