Stock markets were rattled Wednesday by worries about incoming US President Donald Trump slapping tariffs on imports and the fading prospects for interest rate cuts.
US stocks futures and European shares turned lower after CNN reported that Trump is considering declaring a national economic emergency to provide legal cover to impose tariffs on all imported goods.
“Perhaps more than even during his last term of office, traders will need to pay close attention to everything coming from the new President,” said David Morrison, senior market analyst at Trade Nation.
“And, just to prove a point, the dollar has soared while risk assets have tumbled on reports that Trump is ‘mulling a national emergency declaration to allow for new tariff program’.”
Wall Street stocks opened a smidgen lower after all three main indices ended in the red Tuesday, with the Nasdaq and S&P 500 each shedding more than one percent.
Trump’s pledges to impose import tariffs, slash taxes and curb immigration when he returns to the White House later this month have also raised concerns they will rekindle inflation.
Data released Tuesday pointed to price pressures and a relatively robust US labour market, denting hopes of several more cuts to interest rates in the world’s biggest economy.
Yields on US government debt rose further on Wednesday.
“The higher market rates are creating a headwind for a stock market many would describe at least as having a full valuation,” said Briefing.com analyst Patrick O’Hare said.
Data released Wednesday showed the US private sector added fewer jobs than anticipated in December, payroll firm ADP said, with hiring and wage increases both cooling.
Meanwhile, first-time claims for jobless benefits dipped last week, while those for continuing claims rose.
Focus now turns to Friday’s release of the key non-farm payrolls report, which will provide a fresh snapshot of the US economy.
The Fed has already lowered its outlook for rate cuts to two reductions this year, down from the four forecast in September before Trump’s election victory.
“But speculation is brewing that this could be reduced to just one if price pressures persist,” said Susannah Streeter, head of money and markets at Hargreaves Lansdown.
In Europe, German industrial orders fell more than five percent in November, official data showed Wednesday, in the latest sign of headwinds facing the continent’s largest economy.
On the corporate front, shares in British energy giant Shell slid 1.8 percent on a weak trading update ahead of its full year results, capping gains on London’s benchmark FTSE 100 index.
Asian stock markets closed mostly down Wednesday.
– Key figures around 1430 GMT –
New York – Dow: DOWN less than 0.1 percent at 42,517.12 points
New York – S&P 500: DOWN less than 0.1 percent at 5,904.39
New York – Nasdaq Composite: DOWN 0.1 percent at 19,471.12
London – FTSE 100: DOWN 0.3 percent at 8,223.23
Paris – CAC 40: DOWN 0.8 percent at 7,428.55
Frankfurt – DAX: DOWN 0.2 percent at 20,299.58
Tokyo – Nikkei 225: DOWN 0.3 percent at 39,981.06 (close)
Hong Kong – Hang Seng Index: DOWN 0.9 percent at 19,279.84 (close)
Shanghai – Composite: FLAT at 3,230.17 (close)
Euro/dollar: DOWN at $1.0295 from $1.0342 on Tuesday
Pound/dollar: DOWN at $1.2333 from $1.2479
Dollar/yen: UP at 158.43 yen from 157.98 yen
Euro/pound: UP at 83.47 pence from 82.87 pence
Brent North Sea Crude: UP 0.2 percent at $77.18 per barrel
West Texas Intermediate: UP 0.2 percent at $74.43 per barrel
burs-rl/lth
