London: Global markets reacted to the latest escalation of the US-China trade spat with relative calm on Tuesday. Asian stocks jumped and S&P 500 futures edged higher with European shares after America set its next round of tariffs at 10 percent and Beijing pledged to retaliate
Stocks rise on watered-down tariffs; Pound slips.
While the timeline for fresh levies on $200 billion of Chinese goodsannounced by President Donald Trump represents an escalation of the protectionist dispute, it will be months before the tariffs hit the 25 percent level some investors have been preparing for. Asia equities recovered from early weakness, with benchmarks in Japan and Shanghai jumping. The Stoxx Europe 600 Index also overcame a soft start as automakers and miners advanced.
China’s yuan erased a drop, suggesting traders had been anticipating the latest tariff salvo. The dollar was steady as the euro pared a gain and the pound fell. Treasuries slipped as most European government bonds climbed, though Italian debt underperformed after a report of yet more tension over the country’s impending budget.
Trump has already vowed to increase pressure on China if the Asian nation retaliates to U.S. tariffs, which raises the risk of a tit-for-tat escalation between the world’s two biggest economies. However the rhetoric has been running for months, and many assets have priced in rising tensions, helping to cushion the latest blow.
“While casting a shadow over Asia, the immediate market reaction may be limited given that tariffs on $200 billion of Chinese imports have been in the pipeline for a while,” Mitul Kotecha, senior EM strategist at TD Securities, wrote in a note.
Elsewhere, the Australian dollar shrugged off trade concerns to erase earlier losses and strengthen as the central bank reaffirmed its next interest-rate move would likely be higher. Turkey’s lira fell. Oil was slightly weaker as international supply concerns were overshadowed by a looming demand drop.
Futures on the S&P 500 Index climbed 0.2 percent as of 9:46 a.m. London time. The Stoxx Europe 600 Index rose 0.1 percent to the highest in two weeks. The U.K.’s FTSE 100 Index declined 0.1 percent. Germany’s DAX Index rose 0.6 percent to the highest in two weeks on the biggest advance in more than three weeks. The MSCI Asia Pacific Index jumped 0.8 percent to the highest in two weeks. The MSCI Emerging Market Index increased 0.2 percent.
The Bloomberg Dollar Spot Index rose less than 0.05 percent. The euro was unchanged at $1.1683. The British pound dipped 0.1 percent to $1.3141. The Japanese yen decreased 0.1 percent to 111.98 per dollar.
The yield on 10-year Treasuries gained one basis point to 2.99 percent. Germany’s 10-year yield fell one basis point to 0.45 percent. Britain’s 10-year yield decreased one basis point to 1.525 percent. The spread of Italy’s 10-year bonds over Germany’s increased three basis points to 2.4192 percentage points.
West Texas Intermediate crude declined 0.1 percent to $68.84 a barrel.