U.S. stock indexes opened lower on Friday after the United States announced tariffs on $50-billion worth of Chinese goods, spurring a promise of immediate and equivalent retaliation from Beijing.
The Dow Jones Industrial Average fell 58.60 points, or 0.23 per cent, at the open to 25,116.71. The S&P 500 opened lower by 4.71 points, or 0.17 per cent, at 2,777.78. The Nasdaq Composite dropped 36.01 points, or 0.46 per cent, to 7,725.03 at the opening bell.
In Toronto, the S&P/TSX composite index was down 0.4 per cent, or 66.38 points, to 16,262.58 in a broad-based early decline.
President Donald Trump said in a statement that a 25-per-cent tariff would be imposed on an initial list of strategically important imports from China from July 6 and vowed further measures if Beijing struck back.
China’s Commerce Ministry said it planned to impose tariff measures of similar size and intensity response.
Global financial markets have struggled since February in the face of signs Washington and Beijing were headed toward a trade war after several rounds of negotiations failed to resolve U.S. complaints over Chinese industrial policy, market access and a $375-billion trade gap.
“It has gotten investors nervous,” Peter Cardillo, chief market economist at Spartan Capital Securities in New York.
“It’s going to probably mean a cautious and bumpy ride for the stock markets.”
Shares of manufacturers Boeing and Caterpillar were down more than 1.7 per cent in early trading, and car makers Tesla and General Motors fell 0.7 per cent and 0.6 per cent, respectively.
Investors are also weighing the impact of tightening monetary policy by central banks on the equities market.
The U.S. Federal Reserve increased its key interest rate for the second time this year on Wednesday and hinted at the possibility of two more hikes by the end of 2018.
The European Central Bank weighed in on Thursday to say it would end its bond-purchase program at year-end, even if any interest rate hike was still distant.
NXP Semiconductors rose 1.8 per cent after a media report that Beijing had already approved Qualcomm Inc’s proposed $44-billion acquisition of the chipmaker. Qualcomm was up 0.5 per cent. Sources close to the talks have told Reuters that China is yet to approve.
Adobe shares dropped 2.8 per cent after the company projected third-quarter revenue that fell slightly below estimates. Its shares have run up more than 47 per cent so far this year.
Oil prices fell on Friday 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.
Benchmark Brent crude oil fell by $1.07 a barrel to a low of $74.87 before recovering to $75.12, down 82 cents. U.S. light crude was 360 cents lower at $66.53.
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.
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.”