Wall Street: Global Stocks Fall 3% on Trade Fears

On Wednesday renewed trade concerns saw global stocks plummeting, including in Asia and Europe while on Wall Street shares fell over 3 percent.

U.S. markets were closed for a national day of mourning for the funeral of former President George Bush.

Optimism that the trade dispute between the U.S. and China was resolved saw an equity surge on Tuesday. Remarks by President Trump that if the administration failed to reach a trade deal that was effective he would impose major tariffs on Chinese imports.

Following his comments, Shanghai markets slipped 0.6 percent, Asian shares outside Japan were 1.5 percent lower with U.S. stocks and bond yields falling. The Japanese yen fell 0.3 percent to 113.13 per dollar.

Pan-European index (STOXX) fell 0.75 percent.

Fears of a recession were shaken by global equities, with a flattening U.S. Treasury yield curve. The curve gained momentum last week after the Federal Reserve signaled a nearing to the end of its three-year rate increase.

The German 2-10 year yield curve was at its flattest at 85.70 basis points since mid-2017. 10-year yields fell to six-month lows of 0.247 percent, climbing to 0.259 percent at the closing of markets.

Head of multi-asset at Janus Henderson, Paul O’Connor said that the expectations looking into next year have been pulled back with investors in an uncomfortable neutrality on equities.

Strategist at J.P. Morgan Asset Management, Tai Hui told clients that the flattening of the yield curve overnight reflects the primary concern of economic growth momentum in the U.S.

Focus by markets is on news on Brexit. The pound climbed 0.3 percent to $1.2780 after investors took in the legal advice on the Brexit deal, which confirmed that the customs backstop will kick in if it cannot be resolved, remaining indefinitely.

Following the European Court of Justice’s advocate, general speech where he said that Britain should be able to unilaterally revoke its departure notice, the odds of Britain staying in the EU is up 40 percent from the previous poll of 20 percent according to JP Morgan economists.

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