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GLOBAL MARKETS-Tariff fears hit car shares, lira back on the rack

Published 2018-05-24, 08:41 a/m
GLOBAL MARKETS-Tariff fears hit car shares, lira back on the rack
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* U.S. probe into auto imports weighs on automakers

* Nikkei off 1.1 pct, European shares stall after early gains

* Trump calls for 'different structure' on China-U.S. trade deal

* Turkish lira falls back as much as 3 percent after rate hike

* Wall Street futures point to subdued start

By Marc Jones

LONDON, May 24 (Reuters) - World shares fell on Thursday as cars become the latest focus of U.S. protectionism worries, while Turkey's lira slumped again despite an emergency interest rate increase.

Markets had plenty to digest including minutes from the latest Fed and ECB meetings, but in Asian and European trading it was U.S. plans to investigate auto imports that caused the biggest moves. Nikkei .N225 ended down 1.1 percent after Nissan, Mazda and Toyota all fell .T . In Europe, BMW BMWG.DE , Daimler DAIGn.DE and Volkswagen VOWG_p.DE lost between 2.8 to 3.2 percent. .EU .SXAP

The broader market also gave up morning gains on reports Deutsche Bank (DE:DBKGn) planned to shed at least 7,000 staff and as Wall Street futures went negative. .N .EU

"The carmakers are getting a bit of a bashing, which is not really surprising following Trump's comments overnight," said CMC Markets analyst Michael Hewson. "Personally, I think he is playing to his voter base, but in the broader context of the trade story it is not positive."

The worry for economists is that the move could lead to tariffs similar to those imposed on steel and aluminium in March had also called for "a different structure" in any trade deal with China, fuelling uncertainty over the negotiations. Beijing had fired back, calling the car investigation an abuse of national security clauses the currency markets, Turkey's lira remained the big mover. It weakened as much as 3 percent, surrendering most of the gains it made the previous evening after the country's central bank jacked up its key interest rate by 300 basis points to prop up the plunging currency have sold the lira on concern about the central bank's ability to tame double-digit inflation, particularly after President Tayyip Erdogan - a self-described "enemy of interest rates" - said he expected to assert more policy control after June 24 elections.

The lira TRYTOM=D3 , which initially gained in early trade, weakened to as much as 4.7414 to the dollar from a close of 4.59. It hit a record low of 4.9290 on Wednesday before the central bank move.

"There is one question," said Aberdeen Standard Investment's Viktor Szabo. "Is it enough or not? And I would think it's not enough".

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The dollar dipped after Federal Reserve meeting minutes on Wednesday indicated its policymakers weren't looking to raise U.S. interest rates too fast, though another rise will be warranted "soon" if the economy stays on track. /FRX

It helped the euro EUR= off its recent six-month low even though minutes from the European Central Bank's meeting this month showed more concern about a economic slowdown. was aided too after China signalled its confidence in the shared currency and as calm returned to Italian bond markets. GVD/EUR

Italian President Sergio Mattarella on Wednesday gave political novice Giuseppe Conte a mandate to lead the first government in Italy made up of anti-establishment parties that have vowed to shake up the European Union. preparing now to defend the interests of all Italians in all places, in Europe and internationally," Conte told reporters after holding two hours of talks with Mattarella.

Italy's 10-year bond yield fell 5 basis points to 2.36 percent IT10YT=RR , pulling back from Wednesday's 14-month highs. The Italian/German 10-year bond yield gap was 7 bps tighter at 183 bps GVD/EUR .

That is still well below benchmark 10-year U.S. Treasury yields US10YT=RR , which have drifted back to 3 percent in recent days. /US

It has been part of a broader flight to safety across financial markets. The dollar was down 0.3 percent against the yen to 109.92. JPY=

"With Trump's unpredictable behaviour leaving investors on edge, the Japanese yen has scope to appreciate further in the short term," said Lukman Otunuga, an analyst at FXTM.

In commodities markets, U.S. crude CLc1 was down 1.2 percent at just under $71 a barrel. Oil prices fell on Wednesday after an unexpected rise in U.S. crude and gasoline inventories LCOc1 futures were 1.3 percent lower at $78.80 a barrel, continuing to move lower after rising above $80 last week for the first time since November 2014 O/R

The most-traded iron ore futures on the Dalian Commodity Exchange DCIOcv1 rose for the first time in six sessions on Thursday, gaining 0.3 percent commodity prices continued to put pressure on Australian shares .AXJO , which ended 0.2 percent lower, extending losses into a sixth consecutive session. New Zealand's benchmark S&P/NZX 50 index .NZ50 was 0.7 percent higher.

Gold was slightly higher with spot gold XAU= trading at $1,296 per ounce. GOL/

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http://reut.rs/2sSBRiD

^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Additional Reporting by Andrew Galbraith in Shanghai, editing by Larry King)

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