By IFCMarkets
US stock market selloff continued on Thursday as President Trump announced his intentions to put tariffs on steel and aluminum imports. Dow Jones industrial average tumbled 1.7% to 24608.98. The S&P 500 lost 1.3% to 2677.67 led by industrial stocks with all 11 sectors finishing in the red. The Nasdaq composite fell 1.3% to 7180.56. The dollar weakened as Powell moderated his hawkish comments: the live dollar index data show the ICE US Dollar index, a measure of the dollar’s strength against a basket of six rival currencies, fell 0.5% to 90.19. Futures point to mixed openings today.
Stocks erased earlier gains after President Trump told steel and aluminum executives gathered at the White House that the US would set tariffs of 25% for steel and 10% for aluminum. The imposition of tariffs is feared to spark retaliatory measures by US trade partners and push prices higher, adding to inflation concerns that caused the recent market rout. At his Senate testimony Powell said there is no evidence the economy is overheating as “nothing suggests wage inflation is at the point of acceleration”. Powell’s speech was seen as less hawkish than his comments before House committee on Tuesday which pushed Treasury yields higher and sent all three mains stock indices sharply lower. While Powell’s Senate comments were interpreted as less hawkish and tamping down fears the Fed may shift to more aggressive policy stance, four rate hikes in 2018 remain a distinct possibility. Thus, New York Fed President William Dudley said that four rate increases was within the realm of a “gradual” hiking trajectory, and Thursday’s economic data were better than expected: personal income growth was steady at 0.4% in January while an 0.3% growth was expected, and the ISM’s manufacturing report for February came in at above expected 60.8, the highest since May 2004.
European stocks dropped further on Thursday as disappointing earning reports failed to lift market sentiment bruised by Fed’ chair Powell’s hawkish Tuesday testimony. Both the euro and British Pound turned higher against the dollar. The Stoxx Europe 600 index fell 1.2%. Germany’s DAX 30 tumbled 2% to 12190.94. France’s CAC 40 dropped 1.1% and UK’s FTSE 100 lost 0.8% to 7175.64. Indices opened 0.4%-0.8% lower today.
Markets got little help from economic data either: the final February reading of the euro-zone’s manufacturing PMI came in at 58.6, down from January’s 59.6.
Asian stock indices are falling today as fears of a rise in protectionist policies after Trump’s announcement of steel and aluminum import tariffs undermined market sentiment. Nikkei extended losses slumping 2.5% to 21135.50 as yen grew stronger against the dollar. Chinese stocks are sliding: the Shanghai Composite Index is 0.6% lower and Hong Kong’s Hang Seng Index is down 1.5%. Australia’s All Ordinaries Index is 0.7% lower with Australian dollar steady gainst the greenback.
Brent futures prices are extending losses. Prices fell yesterday after Energy Information Administration weekly report showed US crude production hit a fresh high of 10.283 million barrels a day last week. Brent for May settlement fell 1.4% to close at $63.83 a barrel on Thursday.
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