European markets bounce back despite renewed Trump tariff threats
European markets were optimistic on Friday morning, despite US President Donald Trump threatening to impose 200% tariffs on alcoholic products from the EU, in response to the EU’s 50% levy on whiskey.
Britain’s FTSE 100 was trading 0.2% higher on Friday morning, with Germany’s DAX also rising 0.5%. France’s CAC 40 index advanced 0.5% on Friday as well, with the STOXX 600 index climbing 0.4%.
The European Central Bank (ECB)’s President Christine Lagarde warned in a BBC interview this week that an escalating trade war could have significant consequences across the globe.
“Any trade war is going to hurt the global economy. The initiator, the retaliator, the re-retaliator and so on and so forth- all of that is going to hurt growth at large. Everyone will suffer, this is a constant in the history of trade. Some countries will be hurt more than others, some countries will see inflation move more than others, but everybody is to lose as a result of that,” said Lagarde.
Danni Hewson, head of financial analysis at AJ Bell, said: “European drink makers are unlikely to be raising a glass to Donald Trump, after his latest threat to slap a 200% tax on wine and spirits coming into the US from the EU.”
“The rhetoric from the Trump administration is that picking on all-American brands like Harley-Davidson and Jack Daniel’s is disrespectful and the president is quite prepared to double down and indeed double up on tariffs if his first strike doesn’t hit the mark,” she continued.
Hewson pointed out that this has caused significant uncertainty for investors, saying: “No one is quite sure where the mark is. All they know is that on any given day, trading could start one way and end up with a total volte-face.”
Kyle Chapman, FX analyst at Ballinger Group, said: “This is a market that is very much focused on the trade war as opposed to the macro data this week, and that's why the mild US inflation reports have done little to boost sentiment. That said, the mood has improved overnight as markets express relief over averting a US government shutdown.”
February inflation reports from Germany, France and Spain were also released on Friday, while the UK released its gross domestic product (GDP) report for January.
Asia-Pacific markets overnight
In the Asia-Pacific region, stocks were more buoyant, supported by tech bargain hunters and rising hopes of policy support.
Japan’s benchmark Nikkei 225 closed 0.7% higher at 37,053.10 on Friday, mainly boosted by investors rushing to pick up relatively cheap technology stocks. Bank of Japan Governor Kzuo Ueda has also recently reiterated plans to slash the central bank’s growing balance sheet.