Global Markets Slide as Trump Revives China Tariff Dispute

Asian and European stock markets followed Wall Street lower on Friday amid renewed concerns over credit markets, escalating trade tensions, fears of a tech bubble, and the ongoing US government shutdown.

After months of steady gains and record highs, investors were shaken this week when US President Donald Trump intensified the tariff dispute with China, triggering retaliatory measures and disrupting a period of relative calm.

Credit market worries have compounded investor anxiety, particularly after September bankruptcies by First Brands and subprime lender Tricolor both with significant outstanding debts to lenders.

This week’s troubles deepened with Zions Bancorp reporting a $50 million charge-off linked to commercial loans from its California division, and Western Alliance revealing a borrower’s failure to provide promised collateral. These developments sparked a sell-off in mid-sized bank stocks, which spread across Wall Street, pushing all three major indexes into the red.

The VIX Volatility Index, a key gauge of market anxiety, surged to its highest point since May, while safe-haven assets like gold reached a new record high of $4,379.93 per ounce. Silver also hit a fresh peak.

Thursday’s events undermined the optimism that had driven markets earlier this year, with growing concerns that tech valuations boosted by AI enthusiasm may be unsustainable and vulnerable to a sharp correction. Rodrigo Catril of National Australia Bank noted, “The volatility in regional banks, combined with the collapse of subprime lender Tricolor Holdings, is causing investors to question the overall health of US credit markets.”

The losses seen on Wall Street were mirrored across Asia: Hong Kong’s Hang Seng Index plunged 2.5%, Shanghai dropped 2%, while Tokyo and Taipei each fell over 1%. Other markets including Singapore, Sydney, Wellington, Bangkok, and Manila also closed lower.

European markets followed suit, with London, Paris, and Frankfurt each declining by more than 1%.

Trade tensions remained high after Washington and Beijing exchanged sharp warnings this week, following Trump’s Friday announcement threatening 100% tariffs on Chinese rare earth exports.

Despite the uncertainty, Pepperstone analyst Michael Brown offered a cautiously optimistic outlook: “While the latest round of Trump’s tariff threats continues to hang over markets like the ‘Sword of Damocles,’ there has been little new information. My assumption is that these threats are negotiating tactics and that tensions will ease relatively soon.”

Meanwhile, the US government shutdown continues with no resolution in sight, resulting in department closures and delays in crucial economic data that the Federal Reserve relies on for policy decisions. However, markets have been somewhat buoyed by expectations of at least one more rate cut by the Fed this year, driven by a series of reports indicating a weakening US jobs market.

Crude oil prices extended losses amid worries over Sino-US tensions and news that President Trump plans to meet Russian President Vladimir Putin to discuss ending the Ukraine conflict.

Market Snapshot (around 0715 GMT):

• Tokyo Nikkei 225: Down 1.4% at 47,582.15 (close)
• Hong Kong Hang Seng: Down 2.5% at 25,253.80
• Shanghai Composite: Down 2.0% at 3,839.76 (close)
• London FTSE 100: Down 1.4% at 9,300.54

Currencies:

• Euro/USD: Up to $1.1705 from $1.1692
• Pound/USD: Up to $1.3443 from $1.3436
• Dollar/Yen: Down to 149.54 yen from 150.35 yen
• Euro/Pound: Up to 87.08 pence from 87.02 pence

Oil Prices:

• West Texas Intermediate: Down 0.7% at $57.05 per barrel
• Brent Crude: Down 0.7% at $60.62 per barrel

US Market Close:

• Dow Jones: Down 0.7% at 45,952.24

AFP