New York: US stocks recouped some losses on Friday morning after President Donald Trump’s top economic adviser Larry Kudlow said negotiations between the United States and China over trade differences would start soon.
Wall Street dropped sharply at the open on fears of an escalating trade war between two countries after Trump threatened to slap an additional $100 billion (Dh367 billion) in tariffs on Chinese goods and Beijing warned it would fight back “at any cost” with fresh trade measures.
Kudlow said on told Bloomberg TV that while trade talks with China have not yet begun but will hopefully start in the next few months.
John Doyle, vice president of dealing and trading at Tempus in Washington said the equity markets have experienced the bulk of the volatility from the Trump administration’s mixed signals, but that the currency markets seemed unperturbed.
For the most part, currency markets seem to be taking the tit-for-tat trade war threats with a grain of salt.
At 9:51am ET, the Dow Jones Industrial Average dropped 0.37 per cent to 24,414.88. The S&P 500 fell 0.31 per cent to 2,654.7 and the Nasdaq Composite declined 0.26 per cent to 7,058.23.
The list of decliners were similar to Wednesday’s, when the United States and China announced tariffs on $50 billion of each others’ imports.
Boeing, the single largest US exporter to China, fell 1.12 per cent. Caterpillar declined 1.3 per cent and Deere dropped about 2 per cent.
Chipmakers, which as a group rely on China for about a quarter of their revenue, also declined. The Philadelphia semiconductor index fell 0.54 per cent.
Eight of the 11 major S&P sectors were lower, led by a 0.6 per cent drop in financial stocks as the case for further rate hikes dimmed after soft jobs data.
Investors were also to tune into Fed Chairman Jerome Powell’s speech at an event later in the day for signs the central bank could raise rates more than the expected two more times this year.
Declining issues outnumbered advancers on the NYSE for a 1.41-to-1 ratio and for a 1.28-to-1 ratio favouring decliners on the Nasdaq.
Factbox: Trump trade war could shrink world output by 1.0%: ECB
World economic output could fall as much as one per cent in a year if US President Donald Trump sparks a trade war with America’s partners, a top European Central Bank official said Friday.
“According to ECB staff simulations, world trade in goods could fall by up to 3.0 per cent already in the first year after the change in tariffs and world GDP by up to 1.0 per cent,” central bank board member Benoit Coeure said in a speech in Cernobbio, Italy.
ECB economists modelled a scenario where the United States raised tariffs on all imports by 10 percentage points and its trading partners responded in kind.
“Such a scenario would have significant adverse effects on the global economy, including, and in particular, on the economy that raises tariffs in the first place,” Coeure said according to a transcript provided the ECB.
US gross domestic product would be 2.5 per cent lower after one year than if no new tariffs were introduced, the ECB found. The US economy contracted by nearly 2.8 per cent in 2009 during the global economic crisis.
“Euro area GDP would also decline, but by less than in the US,” Coeure added.
— AFP
