World shares fell on Friday after U.S. President Donald Trump announced new tariffs that sparked fears of a trade war between the U.S. and China, while oil prices plummeted 3 per cent over signs that supply may soon rise.
Mr. Trump announced hefty tariffs on $50-billion of Chinese imports on Friday, with Beijing threatening to respond in kind, in a move that could ignite a trade war between the world’s two biggest economies.
Mr. Trump unveiled a 25-per-cent tariff on a list of strategically important imports from China, promising further measures if Beijing struck back.
MSCI’s gauge of stocks across the globe shed 0.59 per cent, while the pan-European FTSEurofirst 300 index lost 0.76 per cent.
Emerging market stocks were hit particularly hard, tumbling 1.20 per cent, a move maybe attributable as much to a strong dollar as to trade tensions.
“I think the biggest concern at the moment, more than talk about trade, is the tightening of monetary conditions in emerging markets caused by a stronger dollar,” said Michael Hewson, chief markets analyst at CMC Markets in London, noting the Federal Reserve’s forecast for a total of four interest rate rises in 2018.
Mr. Trump’s decision on tariffs comes a day after stock markets had rallied on the European Central Bank’s decision to hold off on raising rates at least until the middle of next year.
Canada’s main stock index slipped lower on Friday, as the materials sector was hurt by a dip in gold prices and the energy group tracked lower oil prices.
At 11:31 a.m. ET, the Toronto Stock Exchange’s S&P/TSX Composite Index was down 12.13 points, or 0.07 per cent, at 16,316.44.
The Canadian dollar was trading at 75.79 cents US, down from an average value of 76.62 cents US on Thursday.
Gold prices fell on profit-taking after the dollar hit a seven-month peak and the metal failed to find support despite fresh trade skirmishes between the United States and China.
Seven of the index’s 11 major sectors were lower, weighed by the materials sectos, which lost 1.4 per cent.
Teck Resources Ltd. was down 6.2 per cent, while First Quantum Minerals Ltd. fell 4.8 per cent. Barrick Gold Corp. and Yamana Gold Inc. both dropped 2.7 per cent.
The energy sector also dropped 1.4 per cent as oil prices fell ahead of an OPEC meeting in Vienna next week as two of the world’s biggest producers, Saudi Arabia and Russia, indicated they were prepared to increase output.
Encana Corp. lost 4 per cent, while MEG Energy Corp. was down 3.7 per cent.
Canada Goose Holdings, which jumped 29.4 percent, was the largest percentage gainer on the TSX. The Luxury apparel maker reported a surprise quarterly profit on Friday.
U.S. share indexes were feeling the hit from the impending tariffs in morning trading.
The Dow Jones Industrial Average fell 206.32 points, or 0.82 per cent, to 24,968.99, the S&P 500 lost 10.85 points, or 0.39 per cent, to 2,771.64 and the Nasdaq Composite dropped 27.06 points, or 0.35 per cent, to 7,733.98.
The outbreak of a global trade war has been the most frequently cited ‘biggest tail risk’ by investors this year in Bank of America Merrill Lynch’s monthly survey of global fund managers, on the back of ramped up protectionist rhetoric and measures by the U.S. administration.
It is not clear when Mr. Trump will activate the measures, but rising Sino-U.S. tensions will put more pressure on China’s economy, which is starting to show signs of cooling.
MSCI’s broadest index of Asia-Pacific shares outside Japan closed 0.65 per cent lower, with Chinese stocks leading the losses.
Oil prices fell sharply Friday, with benchmark Brent crude dropping more than $2 a barrel ahead of an OPEC meeting in Vienna next week as two of the world’s biggest producers, Saudi Arabia and Russia, indicated they were prepared to increase output.
Brent crude oil fell $2.15 a barrel to $73.79 by 10:56 a.m. EDT [1556 GMT]. U.S. light crude was $1.77 lower at $65.12 a barrel. Brent crude is on track to end the week down more than 3 percent, while U.S. crude is heading to fall 0.7 percent.
Both contracts hit 3-1/2-year highs in May, but have since drifted lower as U.S. crude production has risen and as the Organization of the Petroleum Exporting Countries, Russia and other allies look poised to increase output in their meeting in the Austrian capital on June 22-23.
“We’re going into an OPEC meeting where everyone is talking about raising production - the only question is by how much,” said Bob Yawger, director, energy at Mizuho in New York.
Russian Energy Minister Alexander Novak said on Thursday after talks with Saudi Energy Minister Khalid al-Falih in Moscow that both nations “in principle” supported a gradual increase in production after restricting output for 18 months.
“We in general support this ... but specifics we will discuss with the ministers in a week,” Novak said, adding that one option would involve gradually raising output by 1.5 million barrels per day (bpd), possibly starting from July 1.
Falih offered no specific guidance on what any deal in Vienna could look like, but said: “We will see where we go, but I think we’ll come to an agreement that satisfies, most importantly, the market.”
Many analysts expect a rise in output to be agreed.
“The switch has been turned on for a supply increase,” said Olivier Jakob at Swiss oil markets consultancy Petromatrix.