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Markets tumble as Trump says trade wars are 'good and easy to win' - business live | |
(about 4 hours later) | |
The World Trade Organisation has said a trade war is in no one’s interests. | |
In a statement WTO director general Roberto Azevedo said: | |
The WTO is clearly concerned at the announcement of US plans for tariffs on steel and aluminium. The potential for escalation is real, as we have seen from the initial response of others. | |
A trade war is in no one’s interests. The WTO will be watching the situation very closely. | |
More on possible EU retaliation, courtesy Reuters: | |
RTRS sources: EU considering retaliation worth $3.5bn on US steel#SteelTariff pic.twitter.com/9AxeqfjjHS | |
The market falls are continuing. | |
The Dow Jones Industrial Average is now down 1.3%, the FTSE 100 has fallen 1.4% and Germany’s Dax is down 2.3%. Chris Beauchamp, chief market analyst at IG, said: | |
The selling continues apace across markets this afternoon, with the phrase ‘sea of red’ getting an outing once more. It is indeed a ‘risk-off’ afternoon in the old-fashioned sense of the term, with gold being furiously bought as risk assets are dumped unceremoniously overboard. | |
Tariffs do not go down well, it seems. European markets, with their heavy concentrations of industrial stocks, are suffering a double whammy of US tariff concerns and the return of their old foe, a stronger euro. In London the big news has been the speech from the Prime Minister. As ever, it has generated the usual variety of responses, but the aim of conciliatory approach from the UK runs through the text, emphasising the need for both to come together. Given it has been so heavily trailed there has been little market reaction, and the ball now lies in Brussels’ court. | |
While Friday harks back to the crisis days of market volatility, the weekend will resemble those of times past too, as markets wait for results from Germany and Italy. Both are important in their own way, and will help set the tone come Monday, although in the case of Italy maybe no government will be better than one committed to disrupting the established order? | |
The Kremlin may be concerned about the proposed Trump tariffs but Russia’s steel makers should be pretty much unaffected, Reuters is reporting: | |
Russian metals and mining companies face relatively little harm from any introduction of U.S. tariffs on steel and aluminium imports, analysts and company representatives said on Friday. | |
Russia’s top two steelmakers and its leading aluminium producer saw their share prices fall after President Donald Trump said he would impose hefty tariffs to protect U.S. producers... | |
Russia shares Europe’s concern about the decision, Kremlin spokesman Dmitry Peskov said on Friday, adding that Moscow is “carefully analysing the situation which is forming in trade relations after this statement”. | |
Russian deputy prime minister Arkady Dvorkovich said he expected some damage to Russia from the new duties, Interfax news agency reported, but he added that any harm would be more significant for the European Union and China. | |
Analysts also said the long-term impact for Russian steel and aluminium producers would be muted. | |
For Severstal, a leading steel producer, and Rusal, the small size of their U.S. sales makes it easy to redirect to other markets, analysts said. | |
The roughly 300,000 tonnes of steel that Severstal exports to the United States can easily be channelled elsewhere, BCS Global Markets experts said. | |
This was echoed by company representatives, who told Reuters the United States accounted for just 2 percent of Severstal’s sales, though the company’s shares were down 2 percent. | |
“As for aluminium, it is a virtually zero issue as Rusal sells only around 10 percent to 15 percent of volumes there and will send the material elsewhere at virtually no cost,” BCS wrote in a note. | |
Rusal, controlled by businessman Oleg Deripaska, saw its share price fall 3.3 percent. The company did not reply to a request for comment. | |
Russian steelmakers with sizeable exports to the United States would be protected from the impact of tariffs by their U.S. assets, analysts said. | |
Steel producer Evraz, co-owned by Chelsea football club owner Roman Abramovich, exports 0.4 million tonnes of steel slabs to the United States, but its North American assets sell 2.2 million tonnes on the U.S. market, VTB Capital analysts said. Domestic price rises would more than offset the new costs. | |
More indications of a positive US economy, which in turn adds to the case for further interest rate rises from the Federal Reserve. | |
US consumer confidence came in at a better than expected last month, according to the University of Michigan. Its consumer sentiment index rose from 95.7 in January to a final figure of 99.7, better than the expected 99,5 but just below the initial reading of 99.9. The rise came amid the stock market turmoil seen in February and before the latest trade war fears, but followed the Trump tax reforms. | |
The survey’s chief economist Richard Curtin said: | |
Consumer sentiment remained quite favorable in February, at its second highest level since 2004. Consumers based their optimism on favorable assessments of jobs, wages, and higher after-tax pay. The highest proportion of households since 1998 reported that their finances had improved compared with a year ago and anticipated continued gains during the year ahead. | |
Economic news heard by consumers continued to be dominated by the tax reform legislation and net job gains, which was untarnished by the consensus view that interest rates would increase and stock prices would remain volatile. Although rising interest rates was seen as a reason to temper their longer term outlook for the overall economy, only a modest moderation in the pace of economic growth was anticipated. | |
Although consumers expected the unemployment rate to dip below 4% in 2018, only modest wage growth was anticipated, and inflation expectations have remained unchanged. Interest rates, even when pushed higher in the weeks and months ahead, will not cause postponement of discretionary purchases as long as income continues to rise near its present pace. Personal tax cuts are crucial to spur additional spending, but unlike prior cuts that had an immediate positive impact, this tax cut has not generated universal support across partisan lines. Overall, the data signal an expected gain of 2.9% in real personal consumption expenditures during 2018. | |
A bit of historical context. The last time the US went big on protectionism it ended in the Great Depression. Here’s a piece from my colleague Dominic Rushe from earlier in the year when Trump was also talking tough on trade : | |
With no sign of recovery in stock markets Fawad Razaqzada, market analyst at Forex.com, said: | |
Will we really see the start of a trade war? The truth is, the world relies on the US in one way or the other. Retaliation could only hurt the retaliator. So these warnings may not be backed up by action. In fact, there is even the small possibility that Trump may do a U-turn. However, Trump does seem to enjoy global confrontation and with mid-term elections fast approaching, he may press ahead as he aims to protect domestic companies from what he feels unfair trade arrangements. | |
So, as we head into the weekend, sentiment towards both the stock markets and the dollar are clearly negative. The dollar is doing slightly better against commodity currencies, which tend to be move up and down with risk appetite changes. However, against the euro and in particular, the yen, a safe haven currency, the greenback looks rather weak. | |
An economist’s view of the Trump tariffs: | |
One reason why Trump's tariffs are likely to backfire. The number of people who work in steel consumption (who will suffer because of higher prices) is much greater the number who work in steel production (who will benefit). pic.twitter.com/vgHKhZTGrq | |
The prospect of a trade war prompted by Donald Trump’s proposed tariffs on steel and aluminium imports has unsurprisingly sent US markets sharply lower. | |
The Dow Jones Industrial Average is currently down 322 points or 1.2% while the S&P 500 opened down 0.8% and the Nasdaq Composite just over 1%. | |
More from Trump, policy by tweet: | |
When a country Taxes our products coming in at, say, 50%, and we Tax the same product coming into our country at ZERO, not fair or smart. We will soon be starting RECIPROCAL TAXES so that we will charge the same thing as they charge us. $800 Billion Trade Deficit-have no choice! | |