US-China trade War could threaten bull market
Donald Trump’s escalating trade war with China and the EU is poised to put an end to the nearly decade-long Bull Run in equity markets, investors were warned today as HSBC became the latest global company to admit fears over tariffs.
The wealth management arm of the Swiss investment bank UBS said the East-West conflict has reached a “tipping point” and urged action by its clients.
Trade tensions are likely to escalate, UBS said as it warned investors to move their money out of “cyclical stocks”. It told clients to hedge currency holdings to guard against potential sudden fluctuations caused by further tariffs.
“Following the worsening of the global trade conflict, UBS has cut its position on global equities,” it said. The investment bank’s wealth management arm oversees $2.4 trillion (£1.85 trillion) of assets.
The stark warning came as HSBC said escalating tariffs have the potential to trigger a slowdown in China and damage its business.
The chief executive, John Flint, said a “full-blown trade war” would “of course” impact the lender. It has been shifting resources to China over the past few years and now generates almost 90pc of its profits from the continent. HSBC’s results disappointed the City on Monday, with adjusted pre-tax profits – which strip out one-off costs – down 2pc to $12.1bn.
This was due to an 8pc rise in operating costs to $16.4bn.
At the same time, Beijing warned it was ready to endure a “protracted” trade war this evening after lining up $60bn of new tariffs on US goods in recent days. An editorial in a Chinese Communist Party newspaper, seen as a mouthpiece of the government, said that the US had “lost its mind on trade”.