US stocks tumble as Trump vows tariffs on steel and aluminum

AFP – US stocks tumbled Thursday after President Donald Trump said he will enact steep tariffs on steel and aluminum imports, reviving worries of a trade war.

The decline marked the third straight drop in US markets and followed earlier hits to leading European and Asian bourses. Investors had been on edge about higher interest rates even before Trump’s latest comments on trade.

Trump, at a meeting with American steel and aluminum producers, announced that next week he will sign off on measures designed to protect US companies.

The move was sharply criticized by free-market groups such as the Business Roundtable and by trade associations representing automakers, agricultural companies and other sectors.

US stocks sold off decisively following the news, with the Dow losing as much as 2.3 percent on worries that tariffs will exacerbate inflation and prompt retaliatory moves by trading partners.

"Investor sentiment is shaky," said Briefing.com analyst Patrick O’Hare. "It’s not a good thing for the market to get into some kind of trade war."

The prospect of a trade war has been a recurring worry since Trump took office vowing "America First" trade policies, countered by the administration’s market-friendly stances on regulation and taxes. Free market backers of the president have hoped his harsh rhetoric on trade would remain rhetoric and not be translated into action.

"It’s too early to anticipate a trade war between nations," said Alan Skrainka, chief investment officer at Cornerstone Wealth Management. "The market is a little bit overreacting."

Barclays said aluminum and steel imports account for only two percent of goods imported to the US, but added that "the risk to the outlook lies in the response of US trading partners and whether the administration’s decision to impose restrictive trade policies is only the first in a series of moves."

In the end, the Dow finished at 24,608.98, down 1.7 percent, with export-oriented manufacturers such as Boeing and United Technologies, and technology makers such as Apple and Cisco Systems among the biggest losers.

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Gainers included the aluminum maker Century Aluminum and US Steel.

– Interest rate jitters –

Earlier, European markets moved firmly lower, with London ending the day down 0.8 percent, Paris 1.1 percent and Frankfurt 2.0 percent.

In Asian trading, Tokyo fell 1.6 percent, with a stronger yen hitting exporters, while Sydney and Singapore each shed 0.7 percent.

However, Hong Kong recovered initial losses to end up 0.7 percent, while Shanghai rose 0.4 percent.

Investors globally have been rattled by the  prospect of central bank monetary tightening, with heavy focus on congressional testimony from new Federal Reserve chief Jerome Powell, who prompted a sell-off Tuesday with remarks that suggested the US central bank would accelerate interest rate hikes.

Analysts said Powell struck a more dovish tone on Thursday, emphasizing future interest rates would be gradual and allow the economy to expand.

"Overall, Powell maintained his bullish view on the near to medium-term outlook for the US economy, however as a reflection of the questions asked and how he responded, Powell did not further stoke concerns that the Fed would be more hawkish in raising rates this year," Oxford Economics said in a note.

– Key figures around 2140 GMT –

New York – DOW: DOWN 1.7 percent at 24,608.98 (close)

New York – S&P 500: DOWN 1.3 percent at 2,677.67 (close)

New York – Nasdaq: DOWN 1.3 percent at 7,180.56 (close)

London – FTSE 100: DOWN 0.8 percent at 7,175.64 points (close)

Frankfurt – DAX 30: DOWN 2.0 percent at 12,190.94 (close)

Paris – CAC 40: DOWN 1.1 percent at 5,262.56 (close)

EURO STOXX 50: DOWN 1.3 percent at 3,393.95

Tokyo – Nikkei 225: DOWN 1.6 percent at 21,724.47 (close)

Hong Kong – Hang Seng: UP 0.7 percent at 31,044.25 (close)

Shanghai – Composite: UP 0.4 percent at 3,273.75 (close)

Euro/dollar: UP at $1.2263 from $1.2194 at 2200 GMT

Pound/dollar: UP at $1.3775 from $1.3760

Dollar/yen: DOWN at 106.25 yen from 106.68 yen

Oil – Brent North Sea: DOWN 90 cents at $63.83 per barrel

Oil – West Texas Intermediate: DOWN 65 cents at $60.99 per barrel

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