World stocks lose $1.5-trillion on bumpy Asian trade due to US trade storm
London — Modest gains from Europe’s main bourses relieved nervy investors on Tuesday, after the latest escalation in an increasingly global trade storm pummeled Wall Street and sent China into "bear" market territory.
A 0.3% rise from the FTSE in London and 0.4% gains from Frankfurt and Paris were a welcome sight after another bumpy Asian session had extended a sell-off that has now wiped $1.5-trillion off world stocks.
China’s yuan had slumped to a near six-month low against the dollar, while a 0.5% to 0.8% fall on big share markets left them down 20% from their January peaks, a threshold that defines a "bear" market.
The dollar hovered near a 12-day low against a six-strong group of other top world currencies having drifted down against the euro, yen and pound, despite a modest uptick in US bond yields.
"The sell-off in risk assets has eased, but it is certainly not the last storm we are likely to see coming from that direction," said Société Générale’s global macro-strategist Kit Juckes.
The tense atmosphere also kept metals on the defensive as financial markets worried about the wider global economic fallout of the US administration’s "America First" agenda.
US treasury secretary Steven Mnuchin had ramped up the rhetoric again on Monday saying on Twitter that restrictions on investing in US tech firms would apply "to all countries that are trying to steal our technology". Wall Street had tumbled, with the S&P 500 and Nasdaq suffering their steepest losses in more than two months, and the Dow Jones closing below its 200-day moving average for the first time since June 2016.
The so-called Faang (Facebook, Apple, Amazon, Netflix and Alphabet’s Google) stocks, which have led momentum in US stocks, were hammered, too, after having hit record intra-day highs last week. Facebook dropped 2.7%, Amazon fell 3.1%, Netflix slid 6.5%, and Alphabet lost 2.6%. Asia then followed albeit in smaller scale. Tech-heavy indices, such as South Korea’s Kospi and Taiwan’s weighted index fell 0.45% and 0.55%, respectively.
Taiwan Semi-conductor Manufacturing was down 1.8%, South Korean chip maker SK Hynix lost 1%, and Chinese tech giant Tencent Holdings shed 0.3%.
"Unlike the seemingly spur-of-the-moment tweets by [US] President Donald Trump and the retaliatory exchange of tariffs, Washington’s bid to protect intellectual property is an issue at the heart of a trade row between two powers battling for future global supremacy," wrote Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities in Tokyo. "It’s turning out to be a long-term bearish factor for the financial markets, as the US is unlikely to back down at least until past its mid-term elections [in November]."
Another sign of the dust gradually settling in Europe was the first rise in European car shares in eight days. Car makers are another likely target of Trump’s tariff plans.
The euro dipped back having reached a near two-week high of $1.1722, while the dollar was beginning to find some traction again against the yen. It was last at ¥109.67, having fallen to a two-week low of ¥109.365. The yen often attracts safe-haven bids in times of political tension and market turmoil.
Brent crude oil futures were up 0.15% at $74.83 on uncertainty over Libya’s capacity to deliver on exports commitments. Brent futures had fallen 1% overnight as receding investor risk appetite weighed on commodities. Oil prices were capped after oil cartel Opec and its allies agreed on Friday to increase global supplies, albeit modestly.
Trade concerns kept copper on the London Metal Exchange near a two-and-a-half-month low of $6,702.50 a tonne, brushed on Monday. Spot gold shed 0.1% to $1,263.62 an ounce.