Monday 26 August 2019

Global stocks slide amid trade war fears

Markets Report

Fresh trade war fears weighed on global stocks yesterday before a US Federal Reserve meeting, with the dollar holding firm and sterling subdued on growing fears of a no-deal Brexit. (stock picture)
Fresh trade war fears weighed on global stocks yesterday before a US Federal Reserve meeting, with the dollar holding firm and sterling subdued on growing fears of a no-deal Brexit. (stock picture)

Fresh trade war fears weighed on global stocks yesterday before a US Federal Reserve meeting, with the dollar holding firm and sterling subdued on growing fears of a no-deal Brexit.

Combative warnings from US President Donald Trump cast a shadow over Sino-US trade talks, which concluded in Shanghai yesterday. Beijing attributed the lack of progress to Washington's flip-flopping.

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The fresh trade tensions come before a US Federal Reserve meeting on rates.

MSCI's broadest global stock index and Europe's pan regional STOXX 600 both slipped 0.1pc in mid-afternoon trading yesterday. The latter is near a fresh one-month low as worries over trade wars and Brexit offset encouraging signals from the earnings season.

London's FTSE fell 0.1pc, Frankfurt stocks gained 0.3pc and Paris edged up 0.1pc. US futures pointed to the main Wall Street indexes opening higher.

In focus were banks, with strong results from French lender BNP Paribas and Switzerland's Credit Suisse countering a poor report from British bank Lloyds.

"Trade talks have finished without an agreement," said Justin Onuekwusi, fund manager at Legal & General Investment Management. "Of course, it doesn't help that almost as a prelude to the conversation you get tweets that are quite antagonistic."

Mr Trump tweeted a warning to China against waiting out his current presidential term before concluding a trade deal.

Economic data underscored weakness in the eurozone economy, although markets largely shrugged off the news. Figures showed that growth in the bloc halved in the second quarter and inflation slowed sharply in July.

The slowing inflation rate is likely to strengthen market expectations that the European Central Bank, which wants to keep inflation below, but close to 2pc, will further loosen monetary policy in September.

In Asia, shares, excluding Japan, fell to a six-week low with China mainland stocks down nearly 1pc and Hong Kong tumbling 1.3pc. Japan's Nikkei declined by 0.7pc.

China data showing factory activity shrank for the third month in a row in July added to the sombre mood.

Reuters

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