LONDON: Global stock markets eased back on Thursday as concerns about trade wars nibbled at investor confidence and bond yields rose.
“Nerves before US-China trade talks and a little reverberation from yesterday’s meeting of the Federal Reserve have kept markets on edge,” said market analyst Jasper Lawler at London Capital Group.
“As equites fell out of favour, bond yields rose,” he added.
The main indices in London and Paris shed 0.5 percent, while Frankfurt closed down 0.9 percent.
Meanwhile on Wall Street, the Dow was down 1.4 percent in midday trading.
CMC Markets UK analyst David Madden said there was also some profit taking.
“Some major European indices hit their highest levels since February yesterday, and investors are now locking in some profits,” he said in a note to clients.
“Traders took their cues from Asia overnight and decided to exit the equity markets, partially driven by higher yields on government bonds,” he added.
The yield on the 10-year US government bond briefly moving above 3.0 percent last week also caused many investors to reconsider their portfolios. Many investors consider rates of return above 3.0 percent on safe government bonds as sufficiently attractive to lessen their exposure to risky stocks.
The tariff spat between the world’s two biggest economies returned to the fore as a US delegation — including Treasury Secretary Steven Mnuchin and Commerce Secretary Wilbur Ross — sit with Chinese officials in Beijing, with both sides reducing expectations of a quick resolution.
– Trade war worries –
Trading floors have been swamped with worry since US President Donald Trump began this year threatening a series of tariffs on billions of dollars worth of goods, with an emphasis on China, which he claims is gaining an unfair trade advantage over the United States.
Both sides were tempering expectations for the gathering with Hua Chunying, a spokeswoman for China’s foreign ministry, telling reporters it was “not realistic to resolve all issues through only one round of negotiations”.
While China has announced tit-for-tat moves, it has also unveiled a series of measures placating the White House — but there are still worries the situation could spiral into a potentially damaging trade war.
“When you think about the things that have been weighing on the market… I think the one that is really weighing the most heavily is trade and that’s why the market tends to swing the most violently on every new piece of news,” Michael Jones, chairman of RiverFront Investment Group, told Bloomberg TV.
European investors didn’t have any rosy economic data to cheer to improve their sentiment either.
“Today’s European economic data were far from impressive,” said Fawad Razaqzada at Forex.com.
Although the EU is sticking to its projections of solid growth this year and next, the bloc also identified trade protectionism as the biggest threat to the outlook.
A survey of British purchasing managers also disappointed investors, Razaqzada said.
– Key figures around 1530 GMT –
New York – Dow: DOWN 1.4 percent at 23,588.83
London – FTSE 100: DOWN 0.5 percent at 7,502.69 points (close)
Frankfurt – DAX 30: DOWN 0.9 percent at 12,690.15 (close)
Paris – CAC 40: DOWN 0.5 percent at 5,501.66 (close)
EURO STOXX 50: DOWN 0.8 percent at 3,525.74
Hong Kong – Hang Seng: DOWN 1.3 percent at 30,313.37 (close)
Shanghai – Composite: UP 0.6 percent at 3,100.86 (close)
Tokyo – Nikkei 225: Closed for a public holiday
Euro/dollar: UP at $1.1960 from $1.1944 at 2100 GMT
Pound/dollar: DOWN at $1.3550 from $1.3568
Dollar/yen: DOWN at 108.97 yen from 109.91
Oil – Brent North Sea: DOWN 28 cents at $73.08 per barrel
Oil – West Texas Intermediate: DOWN 30 cents at $67.63
Source: Brecorder
