Business World

Saturday 20 October 2018

Trade war sabre-rattling weighs despite US thaw

US President Donald Trump's administration unveiled a plan for a stronger security review process of foreign investors acquiring American technologies. Photo: AP Photo
US President Donald Trump's administration unveiled a plan for a stronger security review process of foreign investors acquiring American technologies. Photo: AP Photo

A friendlier stance by the United States to its trade relationship with China led global stock markets slightly higher on Wednesday, despite a 2pc slide in Chinese equities, and drew the US dollar towards its second straight day of gains.

US President Donald Trump's administration unveiled a plan for a stronger security review process of foreign investors acquiring American technologies, softening its tone from previous remarks indicating it would specifically block Chinese investments.

"Such legislation will provide additional tools to combat the predatory investment practices that threaten our critical technology leadership, national security, and future economic prosperity," Mr Trump said in a statement.

By mid-morning yesterday, the Dow Jones Industrial Average rose 185.82 points, or 0.77pc, to 24,468.93, the S&P 500 gained 13.14 points, or 0.48pc, to 2,736.2 and the Nasdaq Composite added 12.14 points, or 0.16pc, to 7,573.76.

Gains were capped by investors' persistent concerns about the volatility in US-China trade rhetoric.

"Investors are trying to decide what the policy is going to be with respect to trade with China and the rest of the world. It vacillates between their feeling pessimistic about it and some sense of encouragement that it won't be as severe as feared," said Rick Meckler, partner at Cherry Lane Investments.

The pan-European FTSEurofirst 300 index rose 0.90pc and MSCI's gauge of stocks across the globe gained 0.10pc.

MSCI's broadest index of Asia-Pacific shares outside Japan closed 1.24pc lower, while Japan's Nikkei lost 0.31pc.

"After a lot of sabre-rattling, we are seeing Shanghai suffering a lot more than Wall Street, so clearly the first round (of trade war) has been won by America. Unfortunately, that then overflows into emerging markets and Europe," said Peter Lowman, chief investment officer at UK wealth manager Investment Quorum.

Political concerns in Europe are also worrying investors at the margin as a fight over migration policy in Germany's coalition government rumbles on, raising concerns that the eurozone's biggest economy could be headed for snap elections. That contributed to pushing eurozone yields lower, led by Germany.

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