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Dow set for big drop as trade war fears return

07 April, 2018, 09:50 | Author: Samuel Sharp
  • E-mini Dow Jones Industrial Average

The Dow Jones industrial average fell as much as 620 points in afternoon trading Friday, the Associated Press reported.

Boeing, among the hardest-hit stocks on Wednesday after China retaliated with $50 billion in tariffs on USA goods, rose 2.7 per cent, giving the Dow its biggest boost, followed by Goldman Sachs, up 1.3 per cent.

The Dow average, which contains numerous multinational companies including industrial powerhouses Boeing and Caterpillar, has swung dramatically this week, with about 1,300 points separating its lowest point Monday afternoon from its high late Thursday.

The Toronto Stock Exchange's S&P/TSX composite index unofficially closed down 148.64 points, or 0.97 percent, at 15,207.41.

This story is developing and will be updated...

"The ratcheting up of trade tensions clearly carries risks".

European equity markets also retreated, but not as severely, with Paris, Frankfurt and London falling half a percentage point or less.

The White House, in a statement (http://www.marketwatch.com/story/trump-statement-requesting-100-billion-in-additional-china-tariffs-2018-04-05) released after the market close Thursday, said that Trump asked the U.S. Trade Representative to consider an extra $100 billion in Chinese goods to face tariffs (http://www.marketwatch.com/story/futures-fall-as-trump-seeks-100-billion-in-additional-china-tariffs-2018-04-05) and to identify the products that could be targeted.

Many are in a panic over the recent escalation and some believe that China can handle a potential trade war far better than America can due to the nature of its government and economy. Beijing fired back hours later by threatening tariffs on $50 billion worth of U.S. goods, including cars, planes and soybeans. Equities briefly pared declines as White House officials attempted to tone down the rhetoric, suggesting any actions remained far off. Treasury yields and the dollar held losses after Federal Reserve Chair Jerome Powell's first speech as head of the USA central bank.

The moves follow United States tariffs that were imposed earlier this year on Chinese steel and aluminum.

Briefing.com analyst Patrick O'Hare said investors were disappointed by the lack of reassurances from Trump administration officials, including Mnuchin, who told CNBC that the administration hoped to negotiate but acknowledged that a trade war was a possibility.

To make things worse, the United States economy added fewer jobs than expected in March, according to a government report released Friday morning.

The Fed is on track to raise rates three times this year, but it could speed up the increases to keep the economy from overheating.

"Investors breathed a sigh of relief", said Sam Stovall, chief investment strategist at CFRA Research. In February, an unexpected jump in wage growth set off inflation alarm bells and caused stocks to plunge.

The yield on the 10-year US Treasury note, which has been steadily climbing as investors' inflation expectations rise, dipped slightly to 2.78% after the jobs report. "Now we only have one issue to deal with, and that's trade".



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