Showing up Thursday’s rebound as a display of investor naivety, the markets sank on Friday as a new front opened up in Trump’s trade war on the world.
Deciding that, if he can’t have a physical wall, he will create an economic one, Donald Trump announced that the US would be imposing a 5% tariff on all Mexican imports, with that tariff gradually increasing ‘until the Illegal Immigration problem is remedied’. This news basically came out of nowhere, especially since last November saw the President sign the United States-Mexico-Canada Agreement, with that deal now potentially completely upended.
Add on top of this another dire manufacturing PMI out of China – falling from 50.1 to 49.4 – providing further evidence that the country is struggling under the trade war, and the markets had the fear put back up ‘em.
The commodity-heavy FTSE lost 70 points as trading got underway, sinking back to the 7150 intraday, 2-week lows struck on Wednesday. The DAX and CAC, meanwhile, plunged 1.4% and 1.2% respectively; that left the German index under 11750 for the first time in nearly 2 months, with its French cousin at a 3 and a half-month nadir. Looking ahead to this afternoon and things could get even gorier given the Dow Jones is facing a 240 point fall when the bell rings on Wall Street.
As for the pound, it was completely flat against both the dollar and the euro, the currency likely facing another day of gradual price erosion. May has been a disaster – month, not PM, though it applies to both – with cable, at its current levels, down 2.6%.
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