New York: US stocks plunged more than two percent Friday after President Donald Trump warned of tariffs on an additional $100 billion of Chinese imports, provoking a strong response from Beijing and fanning fears of a full-blown trade war.
Investors were unnerved by the latest broadside from the volatile US president and by China’s strident response, which vowed Beijing would stand firm “until the end at any cost.”
“The market is getting more concerned about the possibility of a trade war between the US and China,” said Tom Cahill, portfolio strategist at Ventura Wealth Management.
“The market does not like uncertainty and right now we have a lot of it.”
The Dow finished down 2.3 percent at 23,932.76, with all 30 members ending in the red. The S&P 500 and tech-rich Nasdaq indices also lost more than two percent.
The barbs over trade overshadowed a lackluster jobs report, which placed US jobs growth at 103,000 in March, well below analyst expectations. Unemployment held steady at 4.1 percent.
European equity markets also retreated, but not as severely, with Paris, Frankfurt and London falling half a percentage point or less.
Asian stocks mostly receded on Friday. Tokyo finished in the red, losing 0.4 percent. There were also losses for Seoul and Sydney, while Shanghai was shut.
Hong Kong however outperformed regional peers with a sizeable 1.1-percent gain, with the market playing catch-up after Thursday’s closure.
The more muted response overseas likely reflects skepticism that the harsh trade rhetoric between the US and China will be followed up with concrete action.
Some investors have taken solace from signals that the Trump administration may be taking a harsh line as a bargaining tactic towards deal making with China.
But those hints were absent Friday.
Top White House economic advisor Larry Kudlow, who had repeatedly suggested that US tariffs might not go into effect, reversed himself, and warned Friday that the tariff threat is not a negotiating tactic.
Kudlow said that tariffs were still not a certainty and there were some “back channel” talks going on but “any foreign policy can go wrong.”
US stocks deepened further in the afternoon following an interview with Treasury Secretary Steven Mnuchin and a speech by Federal Reserve Chairman Jerome Powell.
Briefing.com analyst Patrick O’Hare said investors were disappointed by the lack of reassurances from Trump administration officials, including Mnuchin, who told CNBC that the administration hoped to negotiate but acknowledged that a trade war was a possibility.
The Mnuchin interview was a “reminder that things are moving in a contentious direction because there are no negotiations and no one is really backing down on either side on the implementation of tariffs,” O’Hare said.
Fed Chair Powell, meanwhile, signaled that the US central bank still plans to press ahead with additional interest rate hikes in 2018, a stance that also disappointed investors.
“The market might have been starting to contemplate that all the trade volatility might lead the Fed to be a little less aggressive with its policy, and at least for today, the Fed chairman didn’t give any indication that that was going to be the case,” O’Hare said.
Key figures around 2100 GMT
New York – Dow: DOWN 2.3 percent at 23,932.76 (close)
New York – S&P 500: DOWN 2.2 percent at 2,604.47 (close)
New York – Nasdaq: DOWN 2.3 percent at 6,915.11 (close)
London – FTSE 100: DOWN 0.2 percent at 7,183.64 (close)
Frankfurt – DAX 30: DOWN 0.5 percent at 12,241.27 (close)
Paris – CAC 40: DOWN 0.4 percent at 5,258.24 (close)
EURO STOXX 50: DOWN 0.6 percent at 3,408.10 (close)
Tokyo – Nikkei 225: DOWN 0.4 percent at 21,567.52 (close)
Hong Kong – Hang Seng: UP 1.1 percent at 29,833.31 (close)
Euro/dollar: UP at $1.2281 from $1.2240 at 2100 GMT Thursday
Dollar/yen: DOWN at 106.92 yen from 107.39
Pound/dollar: UP at $1.4088 from $1.4003
Oil – Brent North Sea: DOWN $1.22 at $67.11 per barrel
Oil – West Texas Intermediate: DOWN $1.48 at $62.06 per barrel.