Stocks rose and the euro climbed to a three-week peak as the imposition of tariffs by the United States and China on billions of dollars of trade was absorbed calmly by markets on Friday, though concerns about the conflict escalating capped appetite for risk.
World stocks rose 0.4% to their highest level in a week while Asian stocks climbed almost half a percent led by a rebound in Chinese shares.
U.S. equities edged higher in morning trade after monthly jobs data showing a 2,13,000 gain in non-farm payrolls in June and stable wage growth.
Signs of nervousness about the trade outlook were evident elsewhere in global markets with the Japanese yen and the Swiss franc firm against the dollar, while core U.S. and German bonds were in demand.
‘Top of our concerns’
“Trade war concerns have shot up to the top of our concerns for investors,” said Isabelle Mateos y Lago, chief multi-asset strategist at BlackRock Investment Institute.
“We have to be aware that we are only one tweet away from much broader tariffs becoming a reality,” she said, adding that investors were trimming back broad exposure to riskier assets.
Latest flows data confirm that trend. Investors have pulled money out of emerging markets and European equities faster than in 2016 over the last two months, Bank of America Merrill Lynch strategists said on Friday in a weekly note.
The U.S. and China slapped tit-for-tat duties on $34 billion worth of the other’s imports as the world’s biggest economies sharply escalated their conflict.
Broadly sanguine
But despite the threat of more tariffs, global markets remained broadly sanguine with gauges of market volatility in equities and currencies edging lower this week.
For example, implied volatility, a measure of expected market swings on the euro/dollar, has fallen to a one-month low this week while a market gauge on U.S. equities has edged lower.
“What can definitively be said that we are entering a period of much greater uncertainty than before though this low volatility in markets is baffling,” said Neil Mellor, a senior currency strategist at BNY Mellon.
Yuan weakens
The Chinese yuan weakened after choppy trade, keeping some distance from 11-month lows touched earlier this week.
Copper, seen as a barometer of the world’s economic strength because of its wide industrial use, on Friday fell to near a one-year low, at $6,221.50 per tonne, before recouping some losses.
U.S. crude rose 0.51% to $73.31 per barrel and Brent was last at $76.96, down 0.56% on the day.
