Global markets on the ropes after Trump trade war threat

Punch-drunk stock markets suffered through a third straight session of trade war fears on Wednesday, trembling at the prospect of President Donald Trump unleashing a trade war on China. His threat to hike tariffs on $200 billion of Chinese imports at the end of the week had already wiped more than $1 trillion off stock market valuations on Monday and Tuesday.

Nervous investors preferred to shift their money from equities into government bonds, gold or the Japanese yen, all attractive safe-haven assets in times of uncertainty. “We’re in risk aversion mode in the markets as investors prepare for the prospect of tariffs on Friday rather than a trade deal between the world’s two largest economies,” said Craig Erlam, an analyst with OANDA. Some analysts said they couldn’t rule out that Trump would step back from the brink before the new tariffs become a reality, but investors mostly played it safe.

Having traded mostly lower for the first part of the day, some European markets managed to stabilise by the mid-afternoon, but there was little doubt that investors didn’t have the stomach to go hunting for bargains. Frankfurt’s saving grace was a sharp gain in DAX index heavyweight Siemens which reported steady profits and announced the spinoff of its historic power and gas unit.

Wall Street fell again shortly after the start of business in New York. Earlier Wednesday Asian markets slumped again, following Tuesday’s blowout on Wall Street. Oil prices were volatile, with observers predicting a rough near-term for crude futures with supply gaps from Venezuela and Iran having been filled.