Shares stumble after Trump's latest trade threat

HONG KONG, China: Investors were rattled on Thursday after Donald Trump said he would impose unilateral tariffs on partners in the next two weeks, reigniting trade war fears soon after reaching a deal with China to dial down tensions between the superpowers.

The mood was also shaded by geopolitical concerns after the US president said personnel were being moved from the Middle East as nuclear talks with Iran faltered and fears of a regional conflict grew.

The equity losses snapped a recent rally fuelled by talks between Beijing and Washington in London that saw them hammer out a framework agreement to move towards a pact to reduce levies.

Investors have been on edge since Trump’s “Liberation Day” tariff blitz on April 2 that sent shockwaves through stock and bond markets and stoked global recession fears.

Days later he announced a pause in those measures until July 9 to allow for countries to cut deals with the White House, sparking relief rallies that have pushed some markets towards all-time highs.

However, he once again shook confidence by saying on Wednesday that he intended to send letters telling governments what levies Washington would be imposing.

“We’re going to be sending letters out in about a week-and-a-half, two weeks, to countries, telling them what the deal is,” he told reporters.

“At a certain point, we’re just going to send letters out. And I think you understand that, saying this is the deal, you can take it or leave it.”

While some analysts indicated that previous threats had been rowed back, the comments added to the ongoing uncertainty about Trump’s policies, reviving fears about sky-high levies and the impact on the economy.

They also came not long after he had flagged the London agreement, and posted on social media that “President Xi and I are going to work closely together to open up China to American Trade”, referring to his counterpart Xi Jinping.

Stephen Innes at SPI Asset Management said: “Whether this is a hardball negotiation tactic or a pressure valve reset ahead of another 90-day extension is anyone’s guess — but traders are reading it as another layer of headline risk.

“The market knows the Trump playbook: bark, delay, then deal. But the closer we get to the cliff’s edge, the more likely someone slips.”

Rate cut speculation

Most Asian markets fell on Thursday, with Tokyo, Hong Kong, Wellington, Sydney, Taipei, Mumbai, Bangkok and Jakarta in the red after a broadly healthy run-up this week.

London was lower as data showed the UK economy shrank more than expected in April, while Paris and Frankfurt also fell.

There were gains in Singapore, Seoul and Wellington. Shanghai was flat.

The weak performance followed losses on Wall Street, where trade worries overshadowed another below-forecast inflation reading that provided fresh speculation the Federal Reserve will cut interest rates.

Oil prices slipped but held most of Wednesday’s surge of between four and five percent that came after Trump said US personnel were being moved from the potentially “dangerous” Middle East as Iran nuclear talks stutter.

The move came as Tehran threatened to target US military bases in the region if a regional conflict broke out.

The US president said the staff were “being moved out because it could be a dangerous place”.

“We’ve given notice to move out and we’ll see what happens.”