AFP – World stock markets tumbled Wednesday on mounting worries over US-China trade tensions amid talk that China could limit exports of rare earths in another escalation of the months-long fight.
Troubling movements on bond markets also heightened fears of a global slowdown, while a public appearance by US Special Counsel Robert Mueller sparked further speculation on whether US President Donald Trump could face impeachment in Congress.
Asian equities mostly slid as investors grew anxious about a possible economic slowdown in the absence of progress in resolving the US-China trade spat.
That was followed by declines of more than one percent in London, Paris and Frankfurt. Wall Street also finished solidly lower for a second straight session.
"Due to the unquantifiable potential outcome of the increasingly heated trade dispute with China, investors recently concluded it better to retreat rather than rotate," CFRA Research chief investment strategist Sam Stovall said in a research note.
The conflict between Beijing and Washington threatened to deteriorate further as Chinese state media dangled the threat of cutting exports of rare earths to the United States as a counter-strike in the trade war, potentially depriving Washington of a key resource used to make smartphones, military hardware and other crucial goods.
The state-owned Global Times warned in an editorial that the "US will rue forcing China’s hand on rare earths."
"It is believed that if the US increasingly suppresses the development of China, sooner or later, China will use rare earths as a weapon," the nationalist tabloid said.
– China’s ‘secret weapon’? –
Spreadex analyst Connor Campbell rated the threat as the catalyst for Wednesday’s selloff, calling rare earths China’s "not-so-secret weapon in the trade war."
In a sign of intensifying concern over economic growth, the yield, or rate of return for investors, on the 10-year US Treasury notes hit 2.208 percent, the lowest level since September 2017.
Adding to the mix of market headwinds, Mueller made his first public appearance since releasing a report on Russian interference in the 2016 presidential election, saying that a decision not to charge Trump of obstruction of justice was due to Justice Department policy against indicting a sitting president; Mueller pointedly refused to clear the US president of wrongdoing.
Art Hogan, chief market strategist at National Securities, said Mueller’s statement was sure to keep alive talk of impeachment, even though US congressional leaders have so far not embraced that option.
"The market now wrestles with two things at the forefront of uncertainty," Hogan said, citing the worsening US-China trade conflict and a possible impeachment, an event he said would be "nearly impossible" to model for stocks.
– Key figures around 2045 GMT –
New York – Dow: DOWN 0.9 percent at 25,126.41 (close)
New York – S&P 500: DOWN 0.7 percent at 2,783.02 (close)
New York – Nasdaq: DOWN 0.8 percent at 7,547.31 (close)
London – FTSE 100: DOWN 1.2 percent at 7,185.30 points (close)
Frankfurt – DAX 30: DOWN 1.6 percent at 11,837.81 (close)
Paris – CAC 40: DOWN 1.7 percent at 5,222.12 (close)
EURO STOXX 50: DOWN 1.5 percent at 3,297.81 (close)
Tokyo – Nikkei 225: DOWN 1.2 percent at 21,003.37 (close)
Hong Kong – Hang Seng: DOWN 0.6 percent at 27,235.71 (close)
Shanghai – Composite: UP 0.2 percent at 2,914.70 (close)
Pound/dollar: DOWN at $1.2628 from $1.2653 at 2100 GMT
Euro/pound: DOWN at 88.16 pence from 88.20 pence
Euro/dollar: DOWN at $1.1134 from $1.1160
Dollar/yen: UP at 109.62 yen from 109.38 yen
Oil – Brent Crude: DOWN 66 cents at $69.45 per barrel
Oil – West Texas Intermediate: DOWN 33 cents at $58.81 per barrel