The news that the US will impose a 10% tariff on around $200bn of Chinese imports next week made for a wary session across global markets yesterday, as Beijing this morning vowed to retaliate and accused the US of undermining attempts to reach a negotiated trade settlement between the countries. President Trump said the US would increase tariffs to 25% in 2019 if no deal could be struck. While the dollar failed to capitalise on the latest round of trade concerns, sterling hit a 7-week high through signs of progress in the Brexit negotiations. Fear of consequences from the latest spell of trade worries saw minor losses on the stock markets, as the FANGs weighed down on the NASDAQ. Gold reclaimed the $1,200 an ounce level while industrial metal prices fell.
The pound continued its rise to a six-week high against the dollar yesterday, closing the day 80 points (0.60%) up at $1.3147 and wiping out inroads made by the dollar on Friday. The euro also performed well after the release of the latest eurozone inflation data, which remained broadly as expected at 0.2% month-on-month. It gained 0.5% against the dollar to rise to $1.1682. The next major move could well follow the eurozone consumer confidence announcement on Thursday, where it is expected to rise to -0.7 from -1.9.
In London, the FTSE100 ended 1.94 points down at 7,302.10 while Germany’s DAX, holder of large exporters and car manufacturers, fell 1.2% to 12,096.41. In New York, the S&P 500 had its worst day in a month, ending the day 0.6% lower at 2,888 — some 0.9% off August’s record closing high. The Dow Jones Industrial Average was also 0.4% down at the close. The NASDAQ suffered losses of 1.4%, with Apple sliding 2.7% on the day despite some reports that Washington’s tariffs on Chinese imports would spare products like the Apple Watch and the AirPods, the company’s wireless earphones. With Facebook and Amazon also down on the day, there are growing signs that technology stocks are slightly overheated in the short term.
The fall in the dollar helped gold rise $7 to regain the $1,200 an ounce level, showing signs of recovery from its nearly 10% loss over the last 5 months. Copper fell 0.5% in London to $5,773 a tonne and nickel slid 3.1%. Oil prices remained turbulent after the big moves of last week, but are set to be buoyed by the latest escalation in the Sino-US trade war. Brent crude fell by 0.6% to $77.61 per barrel by 04:24 GMT.