Wall Street Follows Asian, European Markets Down

US stocks ended the month on a sombre note on Friday, slumping after President Trump announced new tariff measures on Mexico. It was part of a wider selloff that swept through Asian and European markets earlier in the day.

Major US indices were in the red for the entire session after Trump unveiled his latest trade broadside on Twitter on Thursday night, vowing a string of gradual tariff increases to pressure Mexico into cracking down on illegal immigration into the United States.

The Dow Jones Industrial Average slumped 1.4 percent to 24,815, ending the month with a 6.7 percent loss, the first negative month of 2019.

The S&P 500 dropped 1.3 percent to 2,752, while the Nasdaq Composite Index shed 1.5 percent settling at 7,453.

Trump's latest tariff move amounted to "another log on the fire of global risk aversion," analyst Joseph Manimbo of Western Union Business Solutions said in a client note.

"The news heightened fears of aggressive trade policy slowing growth in the US and globally, sending stocks and oil markets swooning, and investors ducking for cover in safer currencies like the yen, Swiss franc and greenback."

After four strong months to open 2019, the market changed tack in May as Trump's trade relations with China worsened, with fresh tariff announcements on both sides and other hostile moves dimming the odds of a near-term trade agreement.

Investors have also been unnerved by a sharp drop in US Treasury bond yields that has exacerbated anxiety about growth. On Friday, the yield on the 10-year US Treasury fell further.

General Motors and Fiat Chrysler shed 4.3 percent and 5.8 percent, a recognition that the tariffs on Mexico will hit the auto industry especially hard.Investors dumped stocks in favour of safe-haven assets on Friday after being spooked by the latest salvos fired in the global trade war.

With Trump announcing tariffs on all Mexican imports and China warning it would create a list of "unreliable" foreign companies, investors piled into low-risk assets, sending the yield on 10-year German government bonds to a record low.

The rate of return for investors on 10-year German government bonds, or Bunds, hit minus 0.211 percent in the secondary market, breaking the previous record of minus 0.205 percent set in July 2016.

The Hang Seng Index fell 0.8 percent, or 213 points, to close at 26,901.

The yen, another safe-haven investment, shot higher. Because this makes Japanese exports more expensive, Tokyo's main stocks index tumbled 1.6 percent.

In European trading, Frankfurt's DAX 30 closed down 1.5 percent at 11,726, while the FTSE-100 in London fell 0.8 percent to 7,161.

Trump's action comes amid a protracted trade war between the United States and China.

The president's tariff hike on US$200 billion in Chinese goods earlier this month "may already be undermining foreign demand", analyst Julian Evans-Pritchard of consultancy Capital Economics wrote in a research note.

Beijing retaliated by raising tariffs on US$60 billion worth of US goods from Saturday, while official data on Friday showed that China's manufacturing activity contracted more than expected in May.

And on Friday China also announced it would release a list of "unreliable" foreign companies and individuals, striking back after the United States targeted telecom giant Huawei in their escalating trade war. (AFP)

Last updated: 2019-06-1 HKT 04:35