Stocks Slide, Bonds Climb as Trade Tensions Rise: Markets Wrap

By Randall Jensen
Bloomberg
May 31, 2018, 4:02 PM EDT

The Trump administration’s tariffs on imports from key allies sent U.S. and European stocks into a tailspin and stoked demand for the safety of Treasuries.

The S&P 500 fell for the fourth time in five days, paring a monthly advance as the president’s escalation of trade tensions with Canada, Mexico and the European Union hammered American industrial and financial shares. Deutsche Bank AG fell to a record low after reports that U.S. regulators added it to a group of troubled lenders they monitor. The 10-year Treasury yield fell to 2.84 percent, while Mexico’s peso and Canada’s dollar retreated.

The Trump administration’s unilateral action upended the global trade order and was met with retaliatory actions that could imperil economic growth. The ratcheting up of tension overshadowed reports that Italy is close to forming a government that is more EU-friendly than investors had feared. Investors are also bracing for Friday’s jobs report.

“The hard thing about protectionism, the hard thing about tariffs and quotas, is that you can almost think of it as it’s a slow moving disease, but it’s deadly,” Kristina Hooper, Invesco’s chief global market strategist, said in an interview at Bloomberg’s New York headquarters. “When I look at protectionism, I don’t believe the market truly can price it in at this point because there’s still so many potential iterations. But right now it’s certainly moving further to the extremes when it comes to protectionism and that can be very problematic.”