By William Watts, MarketWatch
Apparently, there’s nothing like a presidential tweet to reveal the biggest fear that cuts across all financial markets.
In this case, President Donald Trump’s announcement via Twitter on Thursday that he plans to impose a 10% tariff on an additional $300 billion of Chinese goods showed that worries about global growth prospects remain a raw nerve.
“Everyone’s greatest concern has been global growth and trade tensions, and now their worries have materialized,” said Kathy Lien, managing director of FX strategy at BK Asset Management, in a note.
Here’s how markets responded:
U.S. stocks, which had all but taken back the steep losses suffered a day earlier amid disappointment over prospects for future Federal Reserve rate cuts, quickly dropped back into negative territory. The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.32% ended around 281 points lower, a fall of 1%, marking a nearly 600-point retreat from Thursday’s session high, while the S&P 500 /zigman2/quotes/210599714/realtime SPX -0.19% dropped 0.9%.
Coming after the disappointment in the Fed’s rate-cut message, stocks now face a “double whammy,” said Alec Young, managing director of global markets for FTSE Russell, in a note.
Investors “are being hit on two fronts as rising trade tensions hurt the growth outlook on the one hand, while the Fed simultaneously seems a little less willing to keep cutting rates,” he said. “It all adds up to a murkier macro environment that makes it harder to predict what earnings will look like down the road. That makes increased volatility more likely.”
Stock-index futures pointed to a lower start on Friday.
But it’s the oil market that may offer the best illustration of how the tariff threat stoked growth worries. Oil-market bulls had previously expressed frustration at crude’s inability to put in a meaningful rally amid a sustained drop in U.S. oil inventories and other seemingly bullish developments, including rising tensions in the Middle East — a phenomenon some analysts tied to worries about global demand.