STOCK VALUES: Stocks around the globe declined on Friday while bonds jumped as a result of investor panic after US President Donald Trump’s shock threat of tariffs on Mexico.
This also risked putting the United States into recession. Moreover, lackluster China data also contributed to investor jitters.
Markets were aggressive in pricing deeper rate cuts from the Federal Reserve. Bond yields, on the other hand, reached new lows. What’s more, parts of the curve inverted further.
For most market experts, this inverted yield curve warns of an impending recession for the world’s biggest economy.
Washington will implement 5 percent tariff starting June 10. This rate would then rise steadily until the illegal immigration across the southern border stops.
Trump took the announcement to Twitter late on Thursday, with the markets totally unprepared for it.
“Very clearly when we all thought that the main trade tensions in the world were between the US and China or perhaps the US and Europe, we hadn’t realized there will be another trade tension with Mexico… and it raises concerns about who the next country may be,” said a strategist from Aberdeen Standard Investments.
Figures in Stock Values
The pan-European STOXX 600 lost 1 percent, dropping to a more than three-month low. Germany’s DAX, which is sensitive to trade news, lost 1.4 percent.
All sectors slipped in negative, with German carmakers losing more than 2 percent.
Volkswagen and Fiat Chrysler, which both have huge exposure to Mexico, plummeted 4 percent.
In Spain, banks that have exposures to Mexico such as Santandel, Sabadel, and Bilbao were also hurt.
Wall Street, meanwhile, is on track for its first monthly decline of 2019. At present, it’s also on its way for some substantial falls. S&P 500 e-mini futures showed a lower open.
In Asia, shares initially slipped, but managed to draw some gains after surviving a turbulent month.
MSCI’s broadest index of Asia-Pacific shares ex-Japan inched 0.2 percent up, although it was still down 7.4 percent for the month.