* Investors spooked after Trump announces China tariffs
* China urges U.S. to pull back from brink
* Stocks on course for 1st quarterly loss since early 2016
* Yen hits highest since November 2016; dollar down
* U.S. Treasury yields set for biggest two-week fall since
* Graphic: World FX rates in 2018 http://tmsnrt.rs/2egbfVh
By Tommy Wilkes
LONDON, March 23 (Reuters) - The threat of a global trade
war sent stock markets sliding on Friday and investors rushing
for the safety of currencies like the yen and government bonds,
after U.S. President Donald Trump announced tariffs on up to $60
billion of Chinese goods.
Another bruising week for stocks has left
global equity markets heading for their first quarterly loss
since early 2016 after a spike in volatility, nervousness about
rising inflation and the spectre of a trade war spooked
investors enjoying a multi-year bull run.
European stocks fell, with Germany's Dax down 1.4
percent, the French CAC 40 1.3 percent lower and
Britain's FTSE 100 0.4 percent in the red.
That followed large falls in the U.S. and overnight in Asia,
although futures pricing pointed to a slight recovery for
U.S. stocks when they opened on Friday.
Trump signed a presidential memorandum on Thursday that
could impose tariffs on up to $60 billion of imports from China,
although the measures have a 30-day consultation period before
they take effect.
China urged the United States to "pull back from the brink",
but investors fear Trump's tariffs are leading the world's two
largest economies into a trade war with potentially dire
consequences for the global economy.
China disclosed its own plans on Friday to impose tariffs on
up to $3 billion of U.S. imports in retaliation against U.S.
tariffs on Chinese steel and aluminium products.
The MSCI World Index, down around 3.4 percent since Monday,
is on course for its worst week since early February when a
spike in volatility sent markets into a tailspin.
"The equity markets are getting clobbered, which is not that
surprising with fears of a trade war breaking out," said Paul
Fage, a TD Securities emerging markets strategist.
With investors seeking out safer assets, many have jumped
into government bond markets in Europe and the United States.
U.S. 10-year Treasury yields, which fell almost
8 basis points on Thursday, rose on Friday but were still set
for their biggest two-week fall since November.
In Europe, benchmark issuer Germany's 10-year bond yields
hovered close to 10-week lows struck a day earlier at around
0.52 percent. While German bond yields recovered in
European trading, they were still on track for their biggest
two-week drop since November.
FLIGHT TO YEN
Many investors also turned to the yen, a currency likely to
benefit from a full-fledged trade war.
The Japanese currency gained as much as 0.6 percent against
the dollar to 104.635 yen, the first time it has been
below 105 since November 2016. Investors later booked profits to
leave the yen up 0.1 percent at 105.19 yen per dollar.
The Swiss franc, another currency bought in times of market
uncertainty, rose 0.2 percent versus the dollar, although
it fell against the euro.
The dollar dropped 0.3 percent against a basket of
"The FX market itself isn't sure, and its reaction to
risk-off and lower bond yields across the board is to buy the
yen and the Swiss franc," Kit Juckes, an FX strategist at
Societe Generale, wrote in a daily note.
In commodity markets, oil prices recouped overnight losses
after Saudi Arabia said that OPEC and Russian-led production
curbs introduced in 2017 will need to be extended into 2019
U.S. crude futures were up 0.5 percent at $64.68 per
barrel after losing 1.3 percent on Thursday, and Brent rose 0.68
percent to $69.38 before giving up most of those gains.
Safe-haven spot gold rose 1.3 percent to $1,342 an
ounce, its highest since Feb. 20. The precious metal is up 2.5
percent this week.
Copper and iron prices both fell, as investors bet demand
for the metals would suffer in a trade war. MET/L.
Daniel Lockyer, senior fund manager at Hawksmoor Investment
Management, said financial markets had failed to price in the
risk of a sell-off.
"It's not that we thought trade wars would cause the market
to fall, it's that there was too much optimism priced into stock
markets," he said.
Emerging markets also sold off heavily as investors dumped
riskier assets on fears of a trade war. MSCI's benchmark
emerging equity index lost 1.7 percent.
South Africa's rand climbed 0.8 percent ahead of a
decision by Moody's on the fate of the country's last remaining
investment grade credit rating.
For Reuters Live Markets blog on European and UK stock
markets open a news window on Reuters Eikon by pressing F9 and
type in 'Live Markets' in the search bar.
(Additional reporting by Dhara Ranasinghe, Helen Reid and Marc
Jones in London, editing by Jane Merriman and Hugh Lawson)
First Published: 2018-03-23 02:28:28
Updated 2018-03-23 15:12:53
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