Trade fears haunt stock markets

The risk that a potential trade deal between the US and China will unexpectedly unravel into acrimony hit German, Irish, and other shares exposed to world trade.

Wall Street’s main indexes tumbled more than 1% as renewed worries over trade negotiations with China stoked global growth worries and kept investors away from risky assets.

Chinese vice-premier Liu He is visiting the US this week for trade talks, as Beijing played down President Donald Trump’s unexpected threat that he would raise tariffs on $200bn (€179bn) worth of Chinese goods to 25% from 10%.

Trade tensions also pushed US treasury yields lower as investors turned to low-risk government bonds, pressuring interest rate sensitive banking stocks.

“Many had been looking at this week as providing a potential breakthrough in talks between the world’s two largest economies, yet we instead have seen the US threaten a raft of new tariffs,” said Joshua Mahony at online broker IG.

“With the prospects of further declines in trade relations between the US and China, it comes as no surprise that we are seeing substantial market declines for Asia focused firms such as Burberry, Standard Chartered, and HSBC.

“Unfortunately, while we have seen a continued focus on weaker growth in China as a result of these trade talks, Europe is also feeling the contagion effects of such a slowdown according to the latest EU forecasts.”

In its spring forecast, the EU projects German GDP will slow to 0.5% this year, down from 1.4% in 2018 and 2.2% in 2017. In 2020, it sees the German economy expanding by 1.5%.

German exports have been hit by a double whammy of a sharp fall in demand for cars and by concerns over a slowing world economy made worse by the trade war between the US and China, a key market for German car makers.

“The slump in the automotive sector had a severe impact on the German economy, reflecting the size of the sector and its complex network of supply chain linkages,” the EU said in its report.

“Furthermore, motor vehicles and vehicle parts are Germany’s most important export product, accounting for close to one fifth of the country’s exports.”

The Dax in Frankfurt fell 1.6%. In Ireland, CRH which is exposed to world growth, fell 3%.

- Additional reporting Reuters