NEW YORK: US stocks tumbled and Treasuries rallied as investors shifted focus from the Federal Reserve to the threat of an escalating trade war with China that has the potential to disrupt global growth.
Major US equity benchmarks fell by more than 1 per cent, with technology-heavy gauges slumping almost 2 per cent. President Donald Trump is set to announce about $50 billion (Dh183.65 billion) of tariffs against China Thursday, according a person familiar with the matter, sparking speculation that the Asian nation will hit back. The 10-year Treasury yield slid toward 2.8 per cent and gold advanced with the yen as investors sought safe havens. The dollar rebounded.
“We still have the tariff issue, which has become increasingly, along with inflation worries for investors, a major concern,” said Quincy Krosby, chief market strategist at Prudential Financial Inc. “Perhaps today there will be clarification on the president’s policies, that will offer clarity and the market will decide the winners and losers based on that. There’s a pocket of uncertainty.”
The threat that a tit-for-tat trade spat with China will erupt and hamper global growth has investors on edge a day after the Fed sought to reassure markets that it’s in no hurry to raise rates even as it lifted growth projections for the world’s largest economy. Trump’s first trade action directly aimed at China would come as policymakers including IMF Managing Director Christine Lagarde warn of a global trade conflict that could undermine the broadest world recovery in years.
Facebook Inc. helped pace a decline in the tech sector, falling as much as 2.5 per cent before paring losses. This week’s sell-off in tech stocks is on pace to be the worst since early February. Other notable decliners Thursday included Accenture Plc and Micron Technology Inc., which reports fiscal second-quarter earnings after the close of trading.
Elsewhere, West Texas oil fluctuated before falling and the Australian dollar slipped after the country’s unemployment rate climbed. The British pound initially jumped after the country’s central bank voted 7-2 to maintain interest rates, but pared as investors digested comments from policymakers that weren’t overtly hawkish.
— Bloomberg
