Global equity markets gained as the latest tit-for-tat US-Chinese trade dispute was seen as barely denting world growth, while US Treasury yields rose in anticipation the Federal Reserve will hike interest rates this year and next.
China said it will levy tariffs on about $60bn (€51bn) worth of US goods, as previously planned, but cut the level of tariffs it will collect. On Monday, US President Donald Trump said 10% tariffs on $200bn of Chinese products will take effect next Monday, reaching 25% by year-end.
MSCI’s gauge of stocks across the globe gained 0.43% and the pan-European FTSEurofirst 300 index rose 0.02%. Wall Street was higher.
China has limited retaliatory levers it can pull on the tariff front, said Anthony Saglimbene, global market strategist at Ameriprise Financial Services in Troy, Michigan.
“The dent on the economic picture is likely to be small. We anticipate this last round of tariffs, the $200bn, it’s only probably going to add 0.2 percentage points to consumer prices. That’s nothing,” he said.
The US took 300 consumer products off its original list of products to receive tariff hikes, which will blunt the impact on the consumer, Mr Saglimbene said.
Dutch bank ING estimated that 2.5% of world trade was now affected by the tariffs, and it will be 4% if Mr Trump carries out threats to put levies on all Chinese imports.
The Dow Jones Industrial Average rose 80.49 points, or 0.31%, to 26,142.61. The S&P 500 gained 13.49 points, or 0.47%, to 2,902.29 and the Nasdaq Composite added 66.75 points, or 0.85%, to 7,962.55.
Overnight in Japan, the Nikkei in Tokyo ended 1.4% higher and MSCI’s 24-country emerging market index was up for the fourth day in the last five.
Despite all the noise, the widely-tracked dollar currency index rose 0.03%, with the euro up 0.06% to $1.169.
US benchmark 10-year and 30-year yields both climbed to fresh four-month peaks as investors continued to price in more interest rate increases by the Fed this year and next.
In Europe, Italian government bond yields fell sharply on growing optimism that Italy’s new coalition budget will respect EU rules on fiscal discipline. Two- and five-year yields fell as much as 15 basis points to their lowest levels since July.