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GLOBAL MARKETS-Trump's tariffs jolt global stocks, lift safe-haven assets

Published 2019-08-01, 09:07 p/m
© Reuters.  GLOBAL MARKETS-Trump's tariffs jolt global stocks, lift safe-haven assets
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* U.S. stock futures down 0.25%, European futures down 0.9%

* Trump imposes 10% tariffs on rest of U.S. imports from China

* Interest rate futures price in Fed rate cut in Sept

* Yen marks biggest gain in 2 years, gold near 6-year high

By Hideyuki Sano

TOKYO, Aug 2 (Reuters) - Global stocks took another beating on Friday while investors piled on to safe-haven assets after U.S. President Donald Trump said he would slap a 10% tariff on the remaining $300 billion of Chinese imports from next month.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 0.51% to its lowest level since mid-June while Japan's Nikkei .N225 tumbled 1.91%.

U.S. stock futures ESc1 lost 0.20% in early Asian trade after the S&P 500 .SPX skidded 0.90% to hit one-month lows overnight, while Pan-European Euro Stoxx 50 futures STXEc1 fell 1.5%.

Trump's move breaks a truce in the trade war struck in June and could further disrupt global supply chains. U.S.-China summit meeting, people had expected there would be a lull for quite some time," said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui DS Asset Management.

"And the market was also relieved by signs of recovery in the semi-conductor sector. But now investors and companies will have to revise their such scenarios."

China's state media quickly denounced the move, with the editor in chief of the Global Times saying on Friday that a trade deal between the United States and China was now "further away." proposed levies triggered a stampede for safe-haven assets, including U.S. bonds, the yen and gold while the yuan and the Australian dollar hit multi-month lows.

Gold XAU= held firm at $1,438.9 per ounce, down 0.4% in Asia after having risen 2.4% on Thursday, staying near a six-year high of $1,453 touched two weeks ago.

The yen edged up to 107.25 on the dollar JPY=EBS after rising 1.3% overnight, its biggest daily gain in more than two years.

The euro also recovered to $1.1090 EUR=EBS , from a two-year low of $1.1027 hit in U.S. trade.

In contrast, the risk sensitive Australian dollar dropped to a seven-month low of $0.6795 AUD=D4 while the offshore yuan hit a nine-month low of 6.9731 CNH= to the dollar.

The 10-year U.S. bond yield fell almost 12 basis points on Thursday to 1.902 percent US10YT=RR , hitting the lowest level since Nov. 8, 2016, when Trump won a surprise victory in the presidential election.

Trump's decision has thrown the Federal Reserve another curve ball that may force it to again cut interest rates to protect the U.S. economy from trade-policy risks after its first rate cut in more than a decade on Wednesday. Fed Chairman Jerome Powell said the rate cut was a "mid-cycle adjustment" and not a start to a full-blown rate-cutting cycle, markets aren't fully convinced.

The October Fed funds rate futures FFV9 have jumped to now fully price in a rate cut in September, compared with only around 60% before the tariff announcement. Another 25 basis point move is priced in by December.

"In the grand scheme of things, it will become clearer and clearer that the Federal Reserve has started an easing cycle and will have no choice but to cut rates further," said Akira Takei, fund manager at Asset Management One.

The new tariffs would hit a wide swathe of consumer goods from cell phones and laptop computers to toys and footwear, at a time when the manufacturing sector is already reeling from the accumulative impact of the trade war.

The U.S. Institute for Supply Management said on Thursday its index of national factory activity fell to 51.2 last month, the lowest reading since August 2016. That came on the heels of surveys in Europe and Asia showing factories under the pump, with manufacturing activity in many countries shrinking in the face of intensifying trade frictions. prices bounced back a tad after suffering sharp falls the previous day.

Brent crude LCOc1 rose 1.2% to $61.24 per barrel, after having fallen 7.0% on Thursday, its biggest daily percentage drop since February 2016.

U.S. West Texas Intermediate (WTI) CLc1 crude rose 1.1% to $54.52, having shed 7.9% on Thursday. (Editing by Sam Holmes & Shri Navaratnam)

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