Stocks fall, Canadian dollar weakens as Trump doubles down on tariffs
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NEW YORK/LONDON :Global equity markets were lower on Friday as the market's recent optimism was hemmed in by rising trade tensions following U.S. President Donald Trump's announcement of tariffs on imports from Canada.
Investors are also bracing for an announcement from Trump of tariffs on the European Union, a move that will likely trigger a tit-for-tat response from the bloc and inject fresh market uncertainty.
Trump said on Thursday the U.S. would impose a 35 per cent tariff on Canadian imports next month and planned to impose blanket tariffs of 15 per cent or 20 per cent on most other trading partners.
On Wall Street, all three main indexes were trading lower. The Dow Jones Industrial Average fell 0.56 per cent to 44,402.79, the S&P 500 dipped 0.33 per cent to 6,259.89 and the Nasdaq Composite fell 0.16 per cent to 20,598.48.
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Benchmark S&P 500 and the Dow were set to end the week lower. The Nasdaq was on track for its fourth straight week of gains.
The indexes posted record closing highs on Thursday as AI chipmaker Nvidia made history, bagging a market valuation above $4 trillion.
In Europe, the STOXX 600 fell 1 per cent but was up 1 per cent for the week. Overnight in Asia, MSCI's broadest index of Asia-Pacific shares outside Japan closed flat, while Japan's Nikkei fell 0.19 per cent.
"We've been hitting all-time highs in the markets and also in some other riskier assets so we've been getting investor euphoria and excitement, with technology and Magnificent Seven leading the way, partly because of anticipation of earnings next week," said Wasif Latif, chief investment officer at Sarmaya Partners in New Jersey.
Trump, whose global wave of tariffs has upended businesses and policymaking, floated a blanket 15 per cent or 20 per cent tariff rate on other countries, a step up from the current 10 per cent baseline rate. This week, he surprised Brazil, which has a trade surplus with the United States, with duties of 50 per cent, and hit copper, pharmaceuticals, and semiconductor chips.
Aside from pockets of volatility in target currencies, stocks, or commodities, markets have offered little reaction to the tariffs, leaving the VIX volatility index at its lowest since late February.
"Today, you're seeing a little bit of a pullback because of the tariffs being announced overnight. It's been three consecutive days of after-market tariff announcements, and they seem to be coming relatively randomly, so you don't know what you're going to get. There's a bit of that nervousness that might be dampening the excitement today," Latif added.
The Canadian dollar weakened 0.3 per cent versus the greenback to C$1.37 per dollar.
The dollar strengthened 0.75 per cent to 147.34 against the Japanese yen but weakened 0.11 per cent to 0.796 against the Swiss franc. The euro was down 0.07 per cent at $1.1692.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, rose 0.25 per cent to 97.83.
Earlier in the week, Trump pushed back his tariff deadline of July 9 to August 1 for many trading partners to allow more time for negotiations, but broadened his trade war, setting new rates for a number of countries, including allies Japan and South Korea, along with a 50 per cent tariff on copper.
Joseph Capurso, head of international economics at the Commonwealth Bank of Australia, said the tariff rate of 35 per cent on Canada was not as bad as feared because most of the imports are still subject to exemptions under the United States-Mexico-Canada Agreement.
Gold prices climbed 1 per cent to a one-week high as investors rushed toward safe-haven assets amid the trade tensions. Spot gold rose 1.15 per cent to $3,360.75 an ounce. U.S. gold futures rose 1.55 per cent to $3,368.90 an ounce.
Treasuries got less of a safe-haven boost, as investor concern about the fragility of long-term U.S. government finances prompted a selloff that pushed up yields. The yield on benchmark U.S. 10-year notes rose 5.7 basis points to 4.403 per cent.
Oil prices rose about 2 per cent as investors weighed a tight short-term market against a potential large surplus this year forecast by the International Energy Agency.
Brent crude futures were up 2.62 per cent, at $70.44 a barrel. U.S. West Texas Intermediate crude gained 2.84 per cent to $68.46 a barrel.
Bitcoin was up 3.44 per cent to $117,488.01, after hitting a new record of $118,832.
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