These Charts Show How Markets Are Reacting to U.S.-China Tariffs
(Bloomberg) -- The realization of the tit-for-tat trade tariffs between the world’s two largest economies that investors have feared since Donald Trump’s presidential-election win is now reverberating across financial markets.
Stocks in Europe and Asia slumped Friday following the biggest losses in U.S. equities since the early-February downdraft. U.S. stocks struggled for direction before edging higher, with the S&P 500 Index trading up 0.2 percent as of 9:57 a.m. New York time.
Meanwhile, investors have sought out haven assets such as the yen and Treasuries. Also moving are the shares of a diverse range of companies from pig breeders to wine companies as investors assess how industries spanning communication technology to aerospace in China will be impacted by planned U.S. tariffs.
Here’s a look at some of the key moves in global markets so far:
The Stoxx Europe 600 Index fell for a third day, dipping 0.5 percent and touching the lowest in more than 13 months before paring some losses.
European corporate debt markets are feeling the brunt of this latest flare-up in geopolitical risk. The Markit iTraxx Europe Crossover index is up another six basis points to its highest since April last year.
Japanese shares suffered the worst of the losses in Asia trading, exacerbated by the strong yen, with the Nikkei 225 Stock Average slumping 4.5 percent to close at an October low while the Topix index retreated 3.6 percent to the lowest since September. Both indexes broke through their average levels over the past 200 days, often considered a technical support.
Hong Kong’s Hang Seng Index was down 2.5 percent, bringing this week’s decline to around 4 percent. China’s Shanghai Composite fell as much as 4.7 percent.
The yen, which often is sought after in times of market stress, broke through the 105 level against the dollar for the first time since November 2016, though it later pared the gain.
As stocks sold off during the U.S. session on Thursday, Treasuries climbed and those moves extended on Friday in Asia. The U.S. 10-year yield fell to 2.8 percent. It stabilized on Friday, with the yield edging higher.
Australian government bonds followed their U.S. peers higher, with 10-year yields coming off five basis points. The Australian dollar also climbed as much as 0.4 percent to 77.23 U.S. cents as the country’s exemption from U.S. tariffs and potential for its goods to replace U.S. products into China combined to give the currency a boost.
China Bond Bounce
Investors also sought refuge in China’s bond market.
Treasury Wine Estates Ltd., the maker of Penfolds Grange, has vinyards in California and got about 44 percent of earnings from the Americas last year. The company is expanding its presence in Asia and some expect it to be the largest contributor to earnings next year.
Meanwhile, companies related to farming are climbing in China. They may benefit if the tariffs on U.S. pork and fruit stem imports of those products.
©2018 Bloomberg L.P.