Wall Street’s euphoria over the paused tariff programme has quickly given way to pessimism as the heightening trade tensions between the US and China threaten to derail global growth.
The S&P 500 index was down 3.2% in afternoon trading with investors flocking to havens such as Swiss francs and gold as the reality of the trade war between the US and China becomes clear, with ever-higher barriers being slapped on each other, such as China restricting Hollywood movies in Asia’s biggest economy.
“Investors are concerned about escalating trade war between the US and China. China now faces an effective 145% tariff rate after the latest hike,” Bank of New Zealand senior interest rate strategist Stuart Ritson said in a note. “Front end treasury yields dropped sharply, and the US dollar fell against G10 currencies.”
The kiwi dollar climbed to 57.53 US cents at 7am in Auckland from 56.94 cents yesterday.
Australia and New Zealand policymakers hit the phones to shore up support for free trade, as NZ prime minister Christopher Luxon and Australian foreign minister Penny Wong spoke separately with leaders across Asia and in Europe to push for trade cooperation.
The Comprehensive and Progressive Trans-Pacific Partnership is seen as a vehicle to support the out of favour rules-based trading system.
Now I long for yesterday
Stocks in Europe were playing catch up with US President Donald Trump’s pause in the tariff regime, with the European Union doing likewise with its counter-tariffs.
The UK’s FTSE 100 index was up 3% and Germany’s DAX 30 gained 4.5%.
Big tech is taking the market ructions in its stride in relation to investment plans in artificial intelligence infrastructure, with Amazon and Google-parent Alphabet reiterating their optimism about the AI opportunity
And while the turmoil has put the kybosh on a number of deals, some parties are pressing ahead with corporate transactions, with Prada saying it will buy Versace from Capri Holdings for US$1.38 billion.
Meanwhile, Ebos Group signalled plans to raise A$250 million through a placement to institutional investors and a share purchase plan for existing retail investors at a 5% discount to yesterday’s closing price. The money raised will pay for the acquisitions of SVS Veterinary Supplies and the remaining 10% stake of Transmedic Ebos doesn’t already own.
Stock markets in the antipodes are set to follow Wall Street lower with Australian futures pointing to a 2.7% decline for the S&P/ASX 200 index.
Local data today include the BNZ-BusinessNZ performance of manufacturing index.
Reporting by Paul McBeth. Image from Zalfa Imani on Unsplash.
