Stocks roiled on 'trade war' talk, bonds advance

Cape Town - Headwinds mounted for global stocks on Friday as President Donald Trump ratcheted up his 'trade war' talk, compounding investor concerns over a more hawkish Federal Reserve and the timing of ending monetary stimulus in Japan.

The Stoxx Euro 600 Index dropped for a fourth day, with Germany’s DAX gauge reaching an 11-month low, as carmakers slumped.

US equity-index futures also fell as a volatility gauge rose. Japan led the retreat in Asia earlier, with the Topix Index deepening losses after Bank of Japan Governor Haruhiko Kuroda mentioned for the first time a possible time frame for discussing exiting its extraordinary easing programme.

The yen surged to its strongest since 2016 and shares from Hong Kong to Australia declined. In Europe, German bunds climbed. The dollar weakened though Treasuries were steady.

Trump pushed back on Friday against a wave of criticism against his proposed steel tariffs, publishing a tweet saying “trade wars are good and easy to win.”

The tariff raises the prospect of tit-for-tat curbs on American exports and higher prices for domestic users, further clouding the outlook for economic growth at a time when central banks around the globe are embarking on policy-tightening or approaching it.

Kuroda’s comments were seen as further evidence that the era of massive central-bank stimulus that boosted asset prices and slashed borrowing costs is coming to an end. Earlier this week, Fed chair Jerome Powell opened the door to speculation that the central bank may quicken the pace of monetary tightening, a move investors worry could derail economic expansion.

“We’re entering a period of turbulence,” Sebastien Page, head of asset allocation at T. Rowe Price, told Bloomberg TV from Baltimore. “So at the margin we are taking away from equities, adding both bonds and cash.”

Trump promised Thursday to impose substantial tariffs on foreign metal imports and European Commission President Jean-Claude Juncker said Europe will respond “firmly” to any new duties. The Cboe Volatility Index is up about 43% this week as traders anticipate more turmoil.

• READ:Trump says trade wars are 'easy to win' as tariff anger spreads

Elsewhere, oil declined amid concerns about increasing US crude production, while copper headed for a two-week low as most industrial metals fell. Gold gained.

Here are some key events scheduled for the remainder of this week:

• Bank of England Governor Mark Carney speech for the inaugural Scottish Economics Conference.

• UK Prime Minister Theresa May delivers a speech on Friday on Britain’s relationship with the European Union.

• China’s annual national legislative meetings start on Saturday and are set to run over two-plus weeks.

• Italy goes to the polls on Sunday.

These are the main moves in markets:

Stocks

• The Stoxx Europe 600 Index sank 1.6% as of 6:44 am New York time, the lowest in three weeks on the biggest tumble in more than three weeks.

• Futures on the S&P 500 Index declined 0.6% to the lowest in more than two weeks.

• The UK’s FTSE 100 Index sank 1% to the lowest in three weeks on the biggest tumble in three weeks.

• Germany’s DAX Index sank 2.2% to the lowest in more than 11 months on the largest tumble in more than three weeks.

• The MSCI Asia Pacific Index fell 0.9%.

• Japan’s Topix index declined 1.8%, Hong Kong’s Hang Seng Index fell 1.6%, and South Korea’s Kospi dropped 1%.

• Australia’s S&P/ASX 200 Index fell 0.7%.

Currencies

• The Bloomberg Dollar Spot Index declined 0.3%, the largest drop in more than a week.

• The euro climbed 0.4% to $1.2312.

• The British pound gained 0.1% to $1.3788.

• The Japanese yen gained 0.8% to 105.35 per dollar, the strongest in almost 16 months on the biggest rise in more than a week.

Bonds

• The yield on 10-year Treasuries declined one basis point to 2.80%, the lowest in more than three weeks.

• Germany’s 10-year yield fell four basis points to 0.64%, the lowest in more than five weeks on the largest fall in a week.

• Britain’s 10-year yield dipped five basis points to 1.467%, the lowest in five weeks.

• Japan’s 10-year yield jumped three basis points to 0.068%, the highest in more than two weeks on the largest surge in more than 14 months.

Commodities

• West Texas Intermediate crude decreased 0.3% to $60.79 a barrel, the lowest in more than two weeks.

• Gold gained 0.4% to $1 322.04 an ounce, the biggest rise in more than a week.

• LME copper gained 0.1% to $6 926.50 per metric ton.

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