Global stocks sink on festering trade war

The numbers are displayed after the closing bell of the Dow Industrial Average at the New York Stock Exchange on June 25, 2018, in New York. US stocks plunged with the Dow sinking as low as two percent, on signs the Trump administration plans new trade actions against China that could spark further retaliation. AFP

NEW YORK, United States – World stock markets sank Monday on worries over a festering global trade war amid reports President Donald Trump plans new curbs on Chinese investment in America.

The selloff, which began in Asia, and continued through the European and US sessions, rendered trading screens a sea of red across the globe.

“Stocks got hit pretty hard on Monday amid escalated fears that the US and China are headed towards a full-blown trade war,” said Briefing.com.

Trump has threatened to strike back against China’s retaliation to the US tariffs that are due to take effect July 6 — potentially escalating the tariffs to $450 billion in Chinese goods.

The administration has also announced plans to by June 30 impose investment restrictions on Chinse companies.

According The Wall Street Journal, the measures likely would target investments in the United States by any firm that is 25 percent Chinese held, although that threshold could drop if the investment is considered sensitive.

But Treasury Secretary Steven Mnuchin rebuffed the reports.

In any case, markets were a in a brittle state, absorbing the expected China move as a continuation on Trump’s threat Friday to impose a 20-percent tariff on auto imports from the European Union in response to EU tariffs.

Frankfurt, Paris and London all lost around two percent or more.

“Markets start the week on a risk-off tone after President Trump threatened to impose tariffs on imported cars from Europe — and he is now planning to curb Chinese investments in ‘sensitive’ US industries,” said analyst Konstantinos Anthis at traders ADS Securities.

US indices also sank to two percent at their low point but recovered some of those losses following an afternoon television interview with senior White House economic adviser Peter Navarro, who tried to calm investor fears about a possible trade war.

The Dow finished down 1.3 percent.

“Downside risks to the economic outlook are rising, with escalating trade tensions currently at the forefront of investors’ minds,” wrote Citi analysts in a research note.

“The next few months will show if these tensions are likely to deteriorate towards full-scale trade war.

“Whether or not they do, the uncertainty is probably already damaging confidence and investment.”

But CFRA Research’s Sam Stovall said US economic growth and earnings forecasts “remain solid” despite some downside risks.

“The biggest uncertainty continues to be the simmering global trade tensions that we currently think will not morph into a full-blown trade war,” Stovall said. “However, we see volatility remaining elevated.” /cbb