Stocks fell sharply, with the Nasdaq down more than two per cent, while Treasury yields dropped and the US dollar weakened yesterday after President Donald Trump said he was weighing a “massive increase” in tariffs on Chinese goods.
Technology-related shares were among the biggest decliners on Wall Street, with an index of semiconductors down 3.7pc. US-listed shares of Chinese firms also dropped. E-commerce firm Alibaba Group Holding was down about 7pc and JD.com Inc dropped 5.6pc. Trump said there was no reason to meet China’s President Xi Jinping in two weeks in South Korea as planned, adding in a Truth Social post that the US is calculating a massive increase in tariffs on Chinese imports.
The step could revive a destabilising tit-for-tat trade war that Washington and Beijing paused amid painstaking diplomacy earlier this year. “He’s caught the market off guard again and thrown more question marks into a market that is being questioned about a very high degree of enthusiasm and being sort of scrutinised for having too much fluff built into it,” said Robert Pavlik, senior portfolio manager at Dakota Wealth in Fairfield, Connecticut.
The Dow Jones Industrial Average fell 461.84 points, or 1.00pc, to 45,896.58, the S&P 500 fell 97.67 points, or 1.45pc, to 6,637.44 and the Nasdaq Composite fell 466.51 points, or 2.03pc, to 22,558.12.
“With equities at high valuations, this sell-off, is a sign of jitters. Everything is priced for perfection so the uncertainty increases market jitters,” said Gene Goldman, chief investment officer at Cetera investment Management in El Segundo, California. US stock indexes had been hitting record highs this week.
MSCI’s gauge of stocks across the globe fell 12.63 points, or 1.27pc, to 980.84.
European shares closed 1.25pc lower, erasing weekly gains in the last-minute slide tied to the fresh threats from Trump. The benchmark STOXX 600 had its worst intraday drop in over a month.
Benchmark US yields extended losses from earlier in the session after the Trump comments, with the 10-year Treasury yield hitting its lowest level since mid-September.
US sovereign debt had been in a holding pattern in recent days as a US federal government shutdown, which started October 1, halted the production of crucial economic indicators.
The yield on benchmark US 10-year notes was last down 7.9 basis points at 4.069pc versus 4.148pc late on Thursday.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.41pc to 98.98, with the euro up 0.41pc at $1.161. Against the Japanese yen, the dollar weakened 0.71pc to 151.98. The yen was headed for declines for the week against the dollar following Japan’s political changes and rate outlook uncertainty.
The Japanese currency has dropped on concerns that the Bank of Japan may not hike interest rates again this year after fiscal dove Sanae Takaichi’s surprise victory to lead the ruling party.
Japanese Finance Minister Katsunobu Kato said yesterday that the government was concerned about excessive volatility in the foreign exchange market. In France, President Emmanuel Macron welcomed mainstream political leaders to a crunch meeting at the Elysee ahead of a self-imposed late-Friday deadline to name a new prime minister.
French blue chip stocks dropped 2pc this week as markets were rocked on Monday after Sebastien Lecornu tendered his and his government’s resignation just hours after announcing the cabinet line-up.
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