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Tillerson exit, renewed trade war fears pummel world shares, dollar

The tariffs, reportedly targeting Chinese tech, electronics and telecoms, were revealed by sources hours after Trump abruptly fired Secretary of State Rex Tillerson

Reuters  |  London 

global market rout, world stocks, global stocks
Traders work on the floor of the New York Stock Exchange, (NYSE) in New York, US | Photo: Reuters

World shares slipped for the second straight day and the dollar held near one-week lows after U.S. Donald Trump's threats to slap $60 billion in tariffs on Chinese imports reminded investors of the threat to world economic growth.

Equity were attempting to recover after Tuesday's hefty losses, heartened by robust Chinese factory data, but struggled to overcome fears of a global trade war as well as the prospect of political uncertainty in the

"As long as the threat of protectionism and a trade war remains, will remain vigilant," analysts told clients.

The tariffs, reportedly targeting Chinese tech, and telecoms, were revealed by sources hours after Trump abruptly fired Tillerson's exit follows that of Gary Cohn, a strong free trade proponent.

Since Trump took office in 2017 as many as 35 senior officials from his administration have walked out, including Tillerson, according to

"The market probably correctly viewed this move as weakening internal opposition to some of Trump's less market-friendly policies, in particular the President's trade policy," said.

That news had sent the dollar skidding, pushed world stocks lower and bond prices higher. The moves accelerated after news broke of the planned tariffs, with Wall Street closing some 0.6-1 percent lower and hefty losses across Asia, led by

The negative momentum faded somewhat in Europe, with a pan-European equity index up 0.24 percent after falling one percent on Tuesday. That left MSCI's all-country equity index down 0.12 percent, its second day in the red.

The dollar was flat after three days of losses while yields were trading just off one-week lows touched earlier in the session.

German 10-year government bond yields approached one-month lows and currently stand 20 basis points below this year's peak at 0.60 percent.

Futures signalled a slightly firmer open for Wall Street, reversing their earlier direction.


The trade war fears eclipsed strong economic data from which showed industrial output expanding at a surprisingly faster pace at the start of the year. Fixed asset investment also beat forecasts, while improved.

The data helped Brent up almost half a percent after two days of declines while copper futures jumped almost one percent.

"(China's) economy is well placed to weather any increase in U.S. tariff rates. In fact, the Chinese statistical bureau is tipping 'relatively fast growth' for both exports and consumption in 2018, " said Craig James, Sydney-based at

The data highlighted the relatively robust picture of China's and also the global economy - the latter is slated to grow this year by 3.9 percent, according to the Monetary Fund's forecast in January.

But with inflation remaining subdued, do not see U.S. interest rates rising faster than currently priced in while European and Japanese rate rises remain a distant prospect.

While a rate rise by the next week is already priced in, Tuesday's data which showed annual U.S. core inflation steady at 1.8 percent did not persuade the Fed could raise rates more than three times this year.

That, along with the trade war fears, is keeping the dollar from strengthening much against a basket of currencies and failed to make any headway against the yen to which it had briefly hit three-week highs around 107 yen.

Central banks in and the euro zone also stuck with their dovish message to

The former revealed in its previous meeting's minutes that most of its policymakers believed it should "persistently" pursue powerful monetary easing.

The euro slipped 0.2 percent against the dollar, inching off an overnight one-month high after said the ECB needed more evidence that inflation was rising towards its target.

Draghi warned however of risks stemming from "possible spillovers of the new trade measures announced by the "

First Published: Wed, March 14 2018. 15:13 IST