Picture: ISTOCK
Picture: ISTOCK

London — World shares fell on Monday, dented by concern over a worsening trade dispute between the US and other major economies, while oil prices gave up some of the gains made after major exporters agreed a modest production increase.

The Wall Street Journal said US President Donald Trump planned to bar many Chinese companies from investing in US technology firms and block additional technology exports to China.

The report hit Asian stocks overnight and in London the pan-European Stoxx 600 index was down more than 0.5% in morning trade.

S&P500 mini futures fell as much as 0.6% while MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.95% to six-and-a-half-month lows. Japan’s Nikkei lost 0.8%. Taking a particular hit on the trade tensions was the European car sector, falling 1.4% and set for its seventh consecutive day of losses after Trump said on Friday he aimed to hike tariffs on EU car imports by 20%. MSCI’s All-Country World index, which tracks shares in 47 countries, was down 0.3% in morning trade in Europe.

As the threat of a full-blown trade war has grown, the gauge has fallen in five of the past six weeks. Last week it fell 1% — its biggest weekly drop in three months.

"We suspect the Trump team will push ahead with these policies (which will elicit reciprocal tariffs from China and the EU) until US equities start to crumble and polls move against Trump," wrote ING strategists in a research note.

A spread between approval and disapproval ratings of the US president had reached its narrowest since March 2017, they noted.

Chinese shares were among the biggest losers, falling 1.27% and tumbling 3.7% last week, as Trump threatened to hit $200bn of Chinese imports with 10% tariffs.

Policy makers in China moved fast to temper any potential economic drag from the dispute, as its central bank said on Sunday it would cut the amount of cash some banks must hold as reserves by 50 basis points.

That reduction in reserve requirements, the third this year, had been widely anticipated by investors and is aimed at accelerating the pace of debt-for-equity swaps and spurring lending for smaller firms.

Despite the move, the CSI300 index of mainland Chinese shares lost 0.8%, edging near the one-year low it touched on Friday.

The index of global car manufacturers fell 0.7%. It lost 4.7% last week.

Trump threatened to impose a 20% tariff on Friday on all imports of EU-assembled cars, a month after his administration launched an investigation into whether car imports posed a national security threat.

A senior European commission official said on Saturday that the EU would respond to any US move to raise tariffs on cars made in the bloc.

Investors and traders are worried that threats of higher US tariffs and retaliatory measures could derail a rare period of synchronised global growth.

Slippery oil

Oil shed some of the gains posted on Friday after Opec and non-Opec producers agreed a modest increase in production from July.

They did not, however, announce a clear target for the output hike, leaving traders guessing how much more will actually be pumped.

Opec and non-Opec said in a statement they would raise supply by returning to 100% compliance with previously agreed output cuts, after months of underproduction.

"Saturday’s Opec[-plus] press conference provided more clarity on the decision to increase production, with guidance for a full 1-million barrels a day ramp-up in [the second half of 2018’," Goldman Sachs said in a note on Sunday.

"This is a larger increase than presented on Friday although the goal remains to stabilise inventories, not generate a surplus."

US crude futures traded at $68.64 a barrel, up 0.1% for the day after Friday’s 4.6% rally.

International benchmark Brent fell 1.2%, however, to $74.61 a barrel, giving up nearly half of its gains made on Friday.

In the currency market the euro trade flat, having retreated in early trade.

German business confidence deteriorated in June, a survey showed on Monday, suggesting the mood among company executives in Europe’s biggest economy was darkening in light of the threat of a global trade war.

The dollar fell nearly half a% to ¥109.48, hitting its lowest levels in two weeks as the Japanese currency firmed on concerns about the global trade frictions.

The Turkish lira gained up to 1.6% on expectations of a stable government after Tayyip Erdogan and his ruling AK Party claimed victory in presidential and parliamentary polls.

But his victory kept alive worry about inflation and the central bank’s independence given recent comments suggesting he wanted to take greater control of monetary policy.

The lira traded at 4.59 to the dollar, up 1.7% from 4.6625 at the end of last week.

Bitcoin steadied after hitting seven-month lows during the weekend as the security of cryptocurrency exchange operators came under more scrutiny. The digital currency fell as low as $5,780 overnight and last stood at $6,155.