US-China spat saps global confidence
Fresh sparring between Washington and Beijing over trade kept up pressure on world markets yesterday, with equities struggling and emerging currencies mostly weaker, led by the Indian rupee hitting a record low.
A bruising session in Asia took MSCI's main Asia-Pacific ex-Japan index to a 10th straight day in the red, its longest losing streak since September 2000.
Bourses in Shanghai, Hong Kong and Tokyo all closed lower, taking emerging equities to a new 15-month low. MSCI's all-country equity index inched up marginally, looking to extend two sessions of modest gains that had snapped six straight days of losses.
"What the market needs is a signal of some relaxation in trade rhetoric, a bit of climbdown," said Salman Ahmed, chief investment strategist at Lombard Odier. "That should be enough as (economic) fundamentals are strong. But you do need a trigger point and so far we have not seen it."
The months-long escalation in tensions between the world's two biggest economies shows no sign of letting up. President Donald Trump said on Tuesday the United States was taking a tough stance with China. That cemented expectations that new levies on Chinese exports will soon be announced.
Earlier China told the World Trade Organisation (WTO) it wanted to impose $7bn a year in sanctions on the United States in retaliation for non-compliance with a ruling in an earlier trade dispute.
Equity markets also faced pressure from US two-year bond yields which touched a decade peak on Tuesday, partly spurred by data that provided yet more evidence of the US economy's strength.
That data had pushed Wall Street to a strong close, led by tech and energy shares, and futures for the tech-heavy Nasdaq benchmark were up 0.2pc yesterday.
The S&P500 and Dow Jones indexes looked set for flat openings, however.
In Europe, a pan-European index rose 0.2pc off recent five-month lows though it gave up earlier strong gains.
Mr Ahmed said another positive catalyst for markets could be signals from the US Federal Reserve that it could slow the pace of interest rate rises.
But emerging currencies stayed under pressure.