Stock markets shrug off opening salvos in trade war

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(iStock)
(iStock)

London - World stock market rose Friday, seemingly unworried by a global trade war that got underway when Brussels slapped retaliatory tariffs on the United States.

Shares in European car manufacturers, however, slid after US President Donald Trump threatened new tariffs on the sector.

Oil prices continued to rise after the Organisation of the Petroleum Exporting Countries said its members agreed on an output increase of one million barrels per day that Saudi Arabia had put forward at a key meeting in Vienna.

European stocks all closed solidly higher and Wall Street also had a strong morning as markets sought to claw back some of the week's losses seen on trade war fears.

Gains in energy sector stocks, inspired by surging oil, pushed the Dow Jones higher, traders reported, and was also behind much of London's closing gains.

Stocks were "looking to pare a weekly loss that has come courtesy of escalated global trade tensions, monetary policy uncertainty and European political turmoil," analysts at the Charles Schwab brokerage said.

Skidding car shares

As European Union tariffs on key US goods - including jeans, bourbon and motorcycles - came into effect, there were fears China and the US will carry through with their own threats, locking the world's three biggest economies in a potentially destructive face-off.

The EU move was in retaliation to US President Donald Trump's decision to hit steel and aluminium imports from the bloc, as part of his "America First" protectionist policy that seeks to close big trade gaps with major world powers.

Trump then threatened Friday to impose a 20% tariff on cars imported from the EU, prompting carmaker shares to skid.

Fiat Chrysler shares lost more than three percent in Milan in an immediate reaction. In Germany BMW was down around two percent while Daimler and Volkswagen both dropped by more than one percent.

Shares in French carmakers Renault - which does not sell cars in the US - and Peugeot were also weaker, but only marginally.

Washington and Beijing have meanwhile traded tit-for-tat threats on hundreds of billions of dollars worth of goods.

'Things about to get worse'

"The underlying tensions between the US and China continue to escalate, and while neither wants a trade war, the US won't accept the status quo, and China won't change its industrial policy," Rabobank senior strategist Michael Every told AFP.

World stock markets have endured a rollercoaster ride this week, as investors fretted over the deteriorating situation.

"The US-EU trade dispute, when viewed alongside the US-China trade tensions, means that we are edging closer to a full-blown global trade war," said John Ferguson, head of global forecasting at the Economist Intelligence Unit.

"The concern here is how Mr Trump responds - he may look to enact further tariffs or even subsidise US farmers who are likely to feel the brunt of the tariffs from US trading partners.

"Both of these moves from Mr Trump would likely lead to a further response from the EU, and this is how a trade war breaks out."

Asia ended a tumultuous week on a cautious note, after Wall Street finished in the red overnight following the ominous exchange of trade threats between the US and China.

"A global trade war has been our top risk to the global economy for many months. Recent events have only confirmed that view," said Ferguson.

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