London: Stock markets mostly slid on Friday as US President Donald Trump eyed further tariffs even as he looked to strike a key trade deal with Canada, while emerging currencies stumbled on fears of contagion from financial crises in Argentina and Turkey, analysts said.
A report that Trump is planning to impose tariffs on a further $200 billion of Chinese imports as soon as next week jolted trading floors.
At the same time, European Commission chief Jean-Claude Juncker on Friday warned that the EU would hit back with tariffs of its own should Trump make good on threats to slap duties on foreign cars, as an EU-US trade truce wobbled.
And in an interview with Bloomberg, Trump threatened to pull the United States out of the World Trade Organization if it does not “shape up”.
Against this backdrop, foreign exchange traders dumped emerging market currencies after Argentina’s peso became the latest to hit the buffers on concerns about the country’s economy.
Markets meanwhile digested news also that inflation in the eurozone slowed to two percent in August as high oil prices fell back slightly.
On the corporate front, Coca-Cola said it had agreed to buy international coffee chain Costa for $5.1 billion from its UK owner Whitbread, in a deal that gives the beverages behemoth its first global coffee brand.
Shares in leisure group Whitbread surged more than 16 percent on London’s benchmark FTSE 100 index, while those in Coca-Cola slid 0.6 percent when trading opened in New York.
However, “even the Coca-Cola glow emanating off of Whitbread couldn’t prevent the FTSE sliding,” said Connor Campbell, analyst at Spreadex traders.
“There had been some hopes the US signing a trade deal with Mexico earlier in the week meant things were perhaps moving in the right direction.
“However, with reports that Trump is looking to impose additional tariffs on China, his threat to pull the US out of the WTO and the tense, terse situation with both the EU and Canada, the markets are back to fretting about his next move,” Campbell added.
– Currency woes –
Elsewhere, attention was firmly on Argentina, whose peso currency has hit a record low near 40 to the dollar.
It has lost more than 50 percent of its value since the start of the year as the government of President Mauricio Macri faces a financial catastrophe.
At the same time Turkey’s lira continues to face heavy selling after a deputy central bank governor resigned with the economy facing a possible recession, made worse by US sanctions. The currency has lost more than 40 percent of its value this year.
The flight out of emerging market units hit India, where the rupee fell to 71 against the dollar for the first time. The embattled currency has lost about 10 percent this year.
And the Indonesian rupiah also dived, briefly hitting the 14,750 to the dollar mark seen during the Asian financial crisis in 1998.
Both Asian countries’ problems have been exacerbated by ballooning current account deficits, while a series of interest rate hikes has failed to staunch the selling in their currencies.
“The spillover from the resurfacing emerging-market turmoil in the Argentina peso and Turkish lira is weighing on EM Asia currencies,” said Ken Cheung, senior FX strategist at Mizuho Bank in Singapore.
Wall Street opened lower Friday, with the Dow slipping 0.2 percent.
In Europe, equities were showing deeper losses in afternoon trading, with London down 0.5 percent, Frankfurt shedding 0.9 percent and Paris falling 1.3 percent.
– Key figures around 1330 GMT –
New York – Dow Jones: DOWN 0.2 percent at 25,939.57
London – FTSE 100: DOWN 0.5 percent at 7,478.52 points
Frankfurt – DAX 30: DOWN 0.9 percent at 12,383.32
Paris – CAC 40: DOWN 1.3 percent at 5,407.35
EURO STOXX 50: DOWN 0.9 percent at 3,401.77
Tokyo – Nikkei 225: FLAT at 22,865.15 (close)
Hong Kong – Hang Seng: DOWN 1.0 percent at 27,888.55 (close)
Shanghai – Composite: DOWN 0.5 percent at 2,725.25 (close)
Euro/dollar: DOWN at $1.1626 from $1.1666 at 2100 GMT
Pound/dollar: DOWN at $1.2964 from $1.3009
Dollar/yen: DOWN at 110.81yen from 111.01 yen
Oil – Brent Crude: DOWN 21 cents at $77.56 per barrel
Oil – West Texas Intermediate: DOWN 23 cents at $70.02.