Headwinds mounted for global stocks on Friday, with Japan’s talk of an end to stimulus compounding investor concerns over a potential trade war and more hawkish Federal Reserve.
The Stoxx Euro 600 Index dropped for a fourth day, with Germany’s DAX gauge reaching a six-month low, as carmakers slumped. U.S. equity-index futures also fell. 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 program. The yen surged to its highest since 2016, Japanese bond yields climbed and shares from Hong Kong to Australia declined. In Europe, German bunds climbed. The dollar weakened though Treasuries were steady.
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. A trade war sparked by President Donald Trump’s planned tariffs may further cloud the outlook for growth.
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 percent this week as traders anticipate more turmoil.
“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.”
Read more how shell-shocked traders find trade angst is latest market menace
Read more on tariffs on steel and aluminum imports proposed by Trump
Elsewhere, oil declined amid concerns about increasing U.S. crude production, while copper headed for a two-week low as most industrial metals fell.
Terminal users can read more in our markets blog.
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.
- U.K. Prime Minister Theresa May delivers a speech Friday on Britain’s relationship with the European Union.
- China’s annual national legislative meetings start Saturday and are set to run over two-plus weeks.
- Italy goes to the polls on Sunday. Read more on how Italian bond spreads could widen substantially should a euroskeptic alliance come to power.
These are the main moves in markets:
Stocks
- The Stoxx Europe 600 Index sank 1.3 percent as of 10:27 a.m. London time, the lowest in three weeks.
- Futures on the S&P 500 Index declined 0.3 percent.
- The U.K.’s FTSE 100 Index fell 0.6 percent to the lowest in three weeks.
- Germany’s DAX Index fell 2 percent to the lowest in six months.
- The MSCI Asia Pacific Index fell 0.9 percent.
- Japan’s Topix index declined 1.8 percent, Hong Kong’s Hang Seng Index fell 1.6 percent, and South Korea’s Kospi dropped 1 percent.
- Australia’s S&P/ASX 200 Index fell 0.7 percent.
Currencies
- The Bloomberg Dollar Spot Index fell 0.1 percent.
- The euro climbed 0.2 percent to $1.2291.
- The British pound gained less than 0.05 percent to $1.3778.
- The Japanese yen increased 0.5 percent to 105.68 per dollar, the strongest in almost 16 months.
Bonds
- The yield on 10-year Treasuries declined less than one basis point to 2.80 percent.
- Germany’s 10-year yield fell three basis points to 0.64 percent, the lowest in five weeks.
- Britain’s 10-year yield dipped four basis points to 1.46 percent, the lowest in five weeks.
- Japan’s 10-year yield increased three basis points to 0.07 percent, the highest in more than two weeks on the largest climb in more than 14 months.
Commodities
- West Texas Intermediate crude decreased 0.3 percent to $60.79 a barrel, the lowest in more than two weeks.
- Gold gained less than 0.05 percent to $1,317.20 an ounce.
- LME copper fell 0.1 percent to $6,912.50 per metric ton, the lowest in more than two weeks.
— With assistance by Adam Haigh
