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Wall Street stocks fell on Tuesday, deepening a recent selloff sparked by investor concerns over the health of the US economy.
The S&P 500 resumed its declines after briefly steadying at the market open and was down 0.8 per cent in morning trading. The Nasdaq Composite fell 0.6 per cent, following its worst day in two and a half years. In Europe, the Stoxx Europe 600 was down 1.3 per cent, while Germany’s Dax was 0.8 per cent lower.
The Nasdaq fell 4 per cent on Monday while the S&P 500 index tumbled 2.7 per cent on fears of the economic impact of Donald Trump’s global trade war.
Trump said on Tuesday he will impose an additional 25 per cent tariff on steel and aluminium imports from Canada, one of the US’s biggest trading partners.
The sell-off has been driven by investors reaction to a “growth scare” in the US, said Andrew Pease, chief market strategist at Russell Investments. “But if there is a recession caused by policy chaos, it will look self-inflicted.”
The euro rose 0.6 per cent to $1.091, meaning it has now recovered almost all its losses since the US election, as investors continued to bet on a better growth picture for Europe on the back of Germany’s “whatever it takes” spending plan announced last week.
The single currency was fuelled both by the start of talks between US and Ukrainian delegations in Saudi Arabia that Kyiv hopes can repair its relationship with Washington and pave the way for peace, and hopes that a defence deal in Germany will be sealed soon, said analysts.
Investors “just want to trade the positive narrative for euro at the moment”, said Kamal Sharma, an FX strategist at Bank of America.
The euro has had a lightning rally this month and saw its best week against the dollar since 2009 last week, as investors have increased growth expectations for the eurozone and trimmed expectations for interest rate cuts by the European Central Bank.
The US dollar, which has been dragged lower by concerns over the health of the world’s biggest economy, fell 0.5 per cent against a basket of six trading partners and is down 4.7 per cent since the start of the year.
Asian stocks, which opened sharply lower on Tuesday following the US sell-off, recovered some ground. Japan’s Topix and exporter oriented Nikkei 225 index finished 1.1 and 0.6 per cent lower respectively. China’s CSI 300 advanced 0.3 per cent.
The shifts followed big moves on Wall Street where investors were unnerved by the rhetoric from senior US administration officials about the equity market falls. Trump said there would be a “period of transition” as the economy adjusted to a global trade war.
Technology and industrial companies led the falls in Asia. Taiwan’s chip manufacturer TSMC was down 2.7 per cent and Korea’s Samsung Heavy Industries retreated 2.1 per cent.
Analysts said some investors were taking profits after the sharp rally in US tech stocks over the past year.
“The whole [US] tech sector has risen so much since last April, even with the correction now, it has still rallied a lot,” said Wee Khoon Chong, a senior markets strategist at BNY.
“People worry this is going to be a meltdown, but I don’t think so,” he added.
“When you have a new, better option, people adjust, valuations adjust,” Chong said.