Asian markets sell off after Trump's tariff announcement; Nikkei leads losses
Trump said on Thursday that the U.S. will impose tariffs of 25 percent for steel and 10 percent for aluminum. The tariffs will be implemented broadly, without targeting specific countries.
Markets stateside fell on the news as investors worried about retaliatory actions from U.S. trade partners that could potentially result in a trade war. In addition, tariffs are also seen as inflationary as they could mean higher prices for consumers.
Japan's trade minister responded to the news on Friday, saying that Japanese steel exports were not a threat to U.S. national security, Reuters reported, citing local wire service Jiji.
"Given uncertainty whether the move presages a path of increased tariff application for the U.S., we expect risk sentiment to remain fragile for now," Chang Wei Liang, a strategist at Mizuho Bank, said in a note.
Steel, automaker stocks hurt
Automakers, which make use of steel and aluminum products, also tracked losses seen stateside. Honda Motor and Toyota Motor sank 3.78 percent and 2.37 percent, respectively.
Other sectors, including technology, were also firmly lower. Sony lost 1.23 percent and SoftBank Group tumbled 3.55 percent.
Against the safe haven yen, the dollar extended losses after two straight days of declines to trade at 105.88.
The greenback's decline against the yen steepened late in Asian trade following comments from Bank of Japan Governor Haruhiko Kuroda. Kuroda said the central bank would think about exiting easy monetary policy if its inflation target was met in fiscal year 2019, Reuters reported.
Elsewhere, the Kospi declined 1.04 percent to finish at 2,402.16, with technology and manufacturing stocks mostly trading lower. Index heavyweight Samsung Electronics fell 2.21 percent by the end of the day, although SK Hynix rose 0.78 percent.
Meanwhile, steelmaker Posco and Hyundai Steel dropped 3.6 percent and 2.99 percent, respectively. Automakers were also firmly in negative territory, with Hyundai Motor down 3.41 percent.
Although South Korea is among the top three sources of U.S. steel imports, it might not be too badly hurt as steel is predominantly traded within Asia, according to Moody's Investors Service.
"The direct impact [of the tariffs] is moderate on Korean steelmakers to low on all the rest of Asia," Marie Diron, managing director of Moody's Investors Service, said in a statement.
Down Under, the S&P/ASX 200 edged down 0.74 percent to close at 5,928.9, with gold producers the only sector to finish the day in the green. Gold stocks rose 1.06 percent. Mining majors were lower, with Rio Tinto sinking 1.27 percent. Meanwhile, Bluescope Steel rose 0.8 percent.
Greater China markets followed regional markets lower, with Hong Kong's Hang Seng Index falling 1.41 percent by 3:00 p.m. HK/SIN. Large cap names were downbeat: China Construction Bank was down 2.68 percent, Tencent lost 1.88 percent and insurer AIA sank 1.98 percent about an hour before the market close.
Mainland markets saw more moderate declines than their regional peers. The Shanghai composite closed 0.59 percent lower at 3,254.58 and the Shenzhen composite slipped 0.64 percent.
Steel and aluminum stocks listed on the mainland recorded steep losses as markets reacted to news about U.S. tariffs, with Baoshan Steel falling 3.9 percent. Shares of Alumimium Corporation of China, or Chalco, lost 2.02 percent.
U.S. markets slid in the last session on the back of Trump's announcement, with stock indexes recording losses of more than 1 percent. The Dow Jones industrial average closed 420.22 points to close at 24,608.98, despite advancing more than 150 points earlier in the session.
Markets also took note of Federal Reserve Chairman Jerome Powell's Thursday testimony before the Senate Finance Committee. Powell said that he did not currently see any signs of overheating in the U.S. economy.
On Friday, U.S. stock index futures traded mixed during Asia afternoon trade, with Dow futures off by 46 points following the sell-off overnight.
The dollar index, which tracks the greenback against its rivals, edged lower to trade at 90.189 by 2:45 p.m. HK/SIN, a touch below Thursday's close of 90.242 and off a high of 90.932 hit overnight.
Europe tumbles by the close as Trump’s tariff announcement spooks investors
The pan-European STOXX 600 extended losses throughout the session, closing down 2.06 percent provisionally. On the week, the STOXX 600 fell 3.68 percent.
In industry news, all sectors closed sharply lower with many finishing the session down over 2 percent, including basic resources, banks, autos and industrials.
On Thursday, Trump said the U.S. would impose a 25 percent tariff on steel imports and 10 percent on aluminum, which could end up hurting companies both inside and outside the U.S. Some analysts argued that U.S. businesses would still have to import such materials while steel and aluminum production develops, potentially meaning higher costs for consumers.
The European Commission has since responded, saying it won't sit idly and will take the decision to the World Trade Organization (WTO). Trump's decision could potentially lead other countries to raise tariffs on products that U.S. consumers buy.
The negative sentiment was seen across global markets Friday, with Asia closing deep in the red and stocks on Wall Street sliding, with the Dow off over 250 points at Europe's market close. Europe's basic resources fell 3 percent, making it the worst performing sector, as miners slipped on the news.
At the same time, recent comments from newly-appointed Fed Chairman Jerome Powell put markets on edge, after he said there are no signs that the U.S. economy is overheating. Investors have become more certain that the Fed will increase rates at a faster pace in 2018.
Earnings, data, Brexit
In the corporate space, LSE shares fell over 2.5 percent after reporting its latest 2017 results. The group posted a 47 percent increase in full-year operating profit.
LafargeHolcim reported Friday that a 3.8 billion Swiss franc ($4.04 billion) impairment charge contributed to a net loss of 3.13 billion Swiss francs for its fourth quarter. The stock sunk 7.5 percent, making it one of the worst performers on the STOXX 600.
Shares of Elekta jumped 12.5 percent by the close after reporting above-forecast earnings. Meantime, Italy's Atlantia announced that it had acquired a 15.49 percent stake in channel tunnel operator Getlink, formerly known as Eurotunnel. Shares of the French group soared 11.5 percent following the news.
During her speech, May said she would like to uphold close ties between the U.K. and the European Union post-Brexit, when it comes to regulations and standards, in an attempt to prevent goods from being delayed at the border, Reuters reported.
In terms of data, growth numbers in Italy, released just two days before voters head to the polls in a key general election, showed an expansion of 0.3 percent in the fourth quarter from the previous three-month period. Preliminary estimates also showed a 1.6 percent growth figure for the year.
S&P 500 and Nasdaq close higher as health care jumps
The S&P 500 traded 0.5 percent higher after falling more than 1 percent. Health care sector was the best-performing sector, gaining 1 percent. Shares of Universal Health Services and Perrigo were among the best-performers in the index.
The Nasdaq composite rose 0.9 percent as the iShares Nasdaq Biotechnology ETF (IBB) advanced 2.6 percent. At its low, the Nasdaq had fallen 1.3 percent.
The Dow Jones industrial average traded 63 points lower after falling as much as 391 points. Johnson & Johnson was one of the best-performing stocks in the index, rising 1.2 percent.
"When there's an opportunity to buy on the dip, people are taking it," said Phil Blancato, CEO of Ladenburg Thalmann Asset Management. "Economically, you're healthy ... and earnings continue to be strong."
But despite trading off their lows, the major averages were on track to post weekly losses.
Stocks traded sharply lower earlier in the session on fears that President Donald Trump's announced tariffs on steel and aluminum could spark a trade war. Domestically-oriented companies in industries like health care would be among the least affected by a trade war.
Trump made the announcement on Thursday, saying the U.S. will implement a 25 percent tariff on steel imports and a 10 percent tariff on aluminum imports next week. The news sent stocks reeling, with the Dow closing 420 points lower, while the S&P 500 and Nasdaq dropped more than 1 percent. It also raised concern that other countries may implement retaliatory tariffs on U.S. exports.
"The tariff announcement that was made is being considered to be a lot more serious than people were expecting," said Tom Martin, senior portfolio manager at Globalt. "Many people thought this would be more targeted. Instead, it's like hitting something with a blunt instrument."
"Clearly, the environment has changed dramatically since the beginning of the year," said Adam Sarhan, CEO of 50 Park Investments. "Fundamentally, you have more bearish dominoes falling."
The tariffs announcement was widely condemned, including by European Commission President Jean-Claude Juncker, who said it "can only aggravate matters." Consequently, markets overseas fell sharply on Friday. The German Dax dropped 2.3 percent, while the Stoxx 600 index— which tracks a broad swath of European stocks — pulled back 2.1 percent.
But Trump stuck to his guns on Friday, tweeting: "When a country (USA) is losing many billions of dollars on trade with virtually every country it does business with, trade wars are good, and easy to win."
In corporate news, Foot Locker shares dropped 12.6 percent after the company reported a bigger-than-expected decline in same-store sales for the previous quarter. Foot Locker's same-store sales fell 3.7 percent, while analysts polled by Reuters expected a decrease of 2.5 percent.
Meanwhile, J.C. Penney's stock fell 6.5 percent after reporting weaker-than-expected revenue and same-store sales.